The two organizations that buy the most loans are the Federal National Mortgage Association, known as Fannie Mae, and the Federal Home Loan Mortgage Corporation, better known as Freddie Mac. They are private companies that began as government agencies.
The following is how Freddie Mac describes itself.
Freddie Mac is a stockholder-owned corporation chartered by Congress in 1970 to keep money flowing to mortgage lenders in support of homeownership and rental housing. Freddie Mac purchases single-family and multifamily residential mortgages and mortgage-related securities, which it finances primarily by issuing mortgage pass through securities and debt instruments in the capital markets. By doing so, we ultimately help homeowners and renters get lower housing costs and better access to home financing.
This means that Freddie Mac gets its money by selling instruments that are types of bonds on Wall Street. The mortgage rates are the rate of return on the mortgage-backed securities, and the mortgages secure the debt. You can buy a mortgage-backed security, creating a big circle that keeps the money flowing.
Charges for administrative or processing fees, commonly called garbage fees, can vary depending on the lender. Take these charges into account when evaluating lenders.
The government agency Government National Mortgage Association, called Ginnie Mae, is also involved in the secondary market. Ginnie Mae does not buy loans or issue mortgage-backed securities. Its role is to guarantee payments to investors on their mortgage-backed securities, reducing the risks associated with these investments. Less risk generally means more people are willing to invest, keeping more money in the system so more loans can be made.