A government-sponsored enterprise (GSE) is a publicly traded corporation established by the US Congress to finance activities for public purposes by originating or purchasing loans (e.g. student loans and mortgages) and securitizing them in the form of asset-backed securities (ABSs) and mortgage-backed securities (MBS) that are then sold to public investors. GSEs are not explicitly backed by the full faith and credit of the US government.
| Securities of US Government-Sponsored Enterprises (GSEs) | |
| Common Name | Legal Name |
| Fannie Mae | Federal National Mortgage Association |
| Farmer Mac | Federal Agricultural Mortgage Corporation |
| Freddie Mac | Federal Home Loan Mortgage Corporation |
| Sallie Mae | Sallie Mae Bank |
The best known GSEs in the United States are the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac) and the SLM Corporation (Sallie Mae). Both Fannie Mae and Freddie Mac are publicly traded companies that purchase mortgages and securitize them in the form of mortgage-backed securities (MBS) that are then sold to public investors. Sallie Mae is a publicly traded corporation established to originate, service and collect private education loans.
Because the issues of GSEs are not explicitly guaranteed by the US government, they require a higher yield than on the securities of federal government agencies of the same maturity. Moreover, the interest income on the issues of GSEs is not exempt from US state and local taxes and is also subject to federal income taxation.