Mortgage Securitization Process
The federal government established three companies for the purpose of mortgage portfolio acquisitions that are financed by issuing bonds to the public. The obligation to the bondholders is paid through mortgage payments generated by the portfolios that they have acquired.
The process of acquiring a mortgage portfolio and issuing a series of bonds backed by that portfolio is called securitization.
The three leading companies in the field of mortgage securitization are:
Freddie Mac - Federal Home Loan Mortgage Corporation.
Fannie Mae - Federal National Mortgage Association.
Ginnie Mae - Government National Mortgage Association.
The bonds issued by these three companies are generally referred to as mortgage-backed securities since the mortgages included in the mortgage portfolio are used to redeem the bonds.