Who Are the Biggest Issuers of Agency Bonds?
The three largest issuers of agency bonds are the Federal National Mortgage Association (known colloquially as Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac), and the Federal Home Loan Banks.
Federal National Mortgage Association (Fannie Mae)
Fannie Mae, which dates back to 1968, raises money by selling bonds. It then turns some of that money over to banks. The banks use the money to make loans, mostly to homebuyers.
Most Fannie Mae bonds (generally available in increments of $1,000) are purchased by institutions: insurance companies, other nations’ central banks (especially China’s), university endowments, and so on. But individual investors are certainly welcome to join in the fun, too.
The agency issues bonds of varying maturities; and, naturally, there’s a large secondary market where you can find any maturity from several months to many years down the pike. Fannie Mae sounds like a public agency, but it is really a private corporation with government oversight.
Federal Home Loan Mortgage Corporation (Freddie Mac)
This agency (which is also, technically, a private corporation tied to the government) was formed in 1970 and is similar to Fannie Mae. So are its multitude of bond issues with their many maturities, denominations of $1,000, and choice of traditional or mortgage-backed.
Freddie Mac buys one residential mortgage every seven seconds and, by so doing, helps to finance one in six homes in the United States. Most of the mortgages are purchased from primary lenders (such as your neighborhood bank). With the money those lenders get from Freddie Mac, they can go out and make more loans.
Like Fannie Maes, most Freddie Macs are bought by institutions.
Federal Home Loan Banks
This is not a single agency but a coalition of 12 regional banks formed in 1932. Its mission is to fund low-income housing and housing projects. The money used for the funding comes from — you guessed it — selling bonds, lots of bonds.