Fannie Mae and Freddie Mac (the government-sponsored enterprises or GSEs) play a key role in the secondary mortgage market, which is crucial in providing capital for mortgage lending. During the housing finance sector's collapse, private capital withdrew from having a significant, competing role with the GSEs. Without the government’s support of the GSEs and FHA-insured loans, which currently constitutes a large portion of the market space, there would be almost no capital available for mortgage lending. This would severely restrict, if not curtail, home sales and any supporting ancillary home sales services.

Fannie and Freddie continue to support around 70% of the mortgage market and remain a vital component of the housing finance system. Congress continues to debate reforms to the GSEs and the conservatorship model, though the near-term chance of reform remains low. FHFA, the regulator overseeing the GSEs, continues to look at ways of reforming Fannie and Freddie while providing mortgage financing to a broad population while protecting taxpayers from unnecessary risk.

Read NAR's Vision for Housing Finance Reform.

Learn more: What is the Secondary Mortgage Market?