Borrowing at almost the same rates as the Treasury, they earn a fortune by investing the money in higher-yielding mortgages and mortgage-backed securities.

ECONOMIST: Fannie, Freddie and Uncle Sam

The government, as owner of mortgages and mortgage-backed securities, will be allowed to make loan modifications by lowering principal and interest rates on mortgages, or extending the life of the mortgage.

FORBES: The Bailout: All Aboard

Fannie and Freddie played a significant role in the explosion of subprime mortgages and subprime mortgage-backed securities.

WSJ: How Government Stoked the Mania

Their problems arose from investments in residential mortgages and residential mortgage-backed securities investments they had always been free to engage in.

FORBES: Why The Glass-Steagall Myth Persists

As part of their conversion to agency status, Fannie and Freddie should auction off their portfolios of duff mortgages and dodgy mortgage-backed securities, with no guarantees for the bidders.

FORBES: Tax & Finance

Mortgage REITs borrow short-term or adjustable-rate money (the federal funds rate has plunged from 6.5% in January to 3.5% today) and use it to buy longer-term mortgages or mortgage-backed securities, playing the spread between the two sets of interest rates.

FORBES: House of Cards

Freddie Mac was started in 1970 to expand the market for American home buying by purchasing mortgages from lenders and repackaging them as mortgaged-backed securities to create a secondary mortgage market.

FORBES: Magazine Article

These groups generally make decisions on modification, forbearance and foreclosure matters on behalf of lenders whose loans reside in securitized mortgages more commonly known as mortgage-backed securities.

FORBES: Homeownership: Politicians Are Killing The American Dream