Fannie Mae and Freddie Mac are Government Sponsored Enterprises (GSE) in the home mortgage business. They have the exact same business model and they do the exact same thing; they buy mortgages on the secondary market, pool them, and then sell them as mortgage-backed securities to investors on the open market. Everything else regarding government guarantees, explicit guarantees, implicit guarantees, subsidies and direct government funding is exactly the same for Freddie Mac as it is for Fannie Mae.
The difference between Freddie Mac and Fannie Mae is that Fannie Mae primarily buys mortgages issued by banks and Freddie Mac primarily buys mortgages issued by thrifts.
In an interview on The Diane Rehm Show, Daniel Mudd, then President and CEO of Fannie Mae was asked about the difference between Freddie Mac and Fannie Mae. His reply was: "Well, they're more similar than they are different. We're both in the market to provide affordability. So we only do affordable loans in the U.S. We have a charter mission to provide stability to the mortgage market and we have a charter mission to provide liquidity so that market we just talked about continues to function. Fannie Mae and Freddie Mac compete with each other in the same market. We're both restricted to only be in that market -- U.S. mortgages -- but we compete with each other. So when those lenders we talked about at the front end -- the banks and others -- think about what they're going to do with their business, they don't just have one choice, they have two choices -- in fact, they have three or four, the Federal Housing Administration participates in this market and the private market also participates, although a little bit more when the sun is shining than recently. So a lot of the private market has now gone away. The Wall Street market has kind of gone away. So those lenders still have choices between Fannie Mae and Freddie Mac, and a purely government choice."
edit History of Fannie Mae vs. Freddie Mac
While Fannie Mae was a federal program created in 1938 as part of the New Deal, Freddie Mac was chartered by Congress as a private corporation in 1970. From 1938 to 1968, the secondary mortgage market in the United States was monopolized by Fannie Mae which was an actual government agency during that timeframe. Then in 1968, in order to help balance the federal budget Fannie Mae was converted to a private corporation. Then, in order to provide competition in the secondary mortgage market and to end Fannie Mae's complete monopoly, Congress created Freddie Mac as a private corporation in 1970.