GSE
Government Sponsored Enterprises
These are corporations that are public (not government). They were started by congress though so as the name suggests, the government doesn't want them to ever fail.
The Federal National Mortgage Association (Fannie Mae
) and the Federal Home Loan Mortgage Corporation (Freddie mac) are both GSEs. These are mortgage backed securities (MBS) and are traded on the NYSE.
Because mortgages pay more to investors then government bonds and because investors consider these to be pretty safe (since they are government sponsored) they have been very popular. The more demand for MBSs, the cheaper it costs banks to unload their mortgages = lenders can offer lower rates.
Wonder if the opposite would be true too
