Final answer:
Fannie Mae and Ginnie Mae differ in their structures and the types of loans they handle. Fannie Mae securitizes conventional mortgages, while Ginnie Mae only guarantees securities backed by federally insured loans. The financial crisis led to the nationalization of Fannie Mae, highlighting the importance of these institutions.
Step-by-step explanation:
The difference between Fannie Mae and Ginnie Mae lies in their structure and the type of mortgages they securitize.
Fannie Mae, or the Federal National Mortgage Association, is a government-sponsored enterprise (GSE) that buys mortgages from private lenders, pools them, and sells them as mortgage-backed securities to investors on the open market.
Unlike Fannie Mae, Ginnie Mae, or the Government National Mortgage Association, is a part of the U.S. Department of Housing and Urban Development and guarantees securities backed by mortgages that are insured or guaranteed by other federal agencies, such as the FHA and VA.
While Fannie Mae deals with conventional loans not insured by the government, Ginnie Mae's involvement is strictly with federal government-backed loans.
During the financial crisis, as detailed in the Freddie Mac Update, many financial institutions were at risk of default, including Fannie Mae.
Fannie Mae and Freddie Mac had to be nationalized, indicating the magnitude of their financial distress. The Dodd-Frank Act later aimed to reform and stabilize the financial system to prevent such catastrophes in the future.