What Was a Tandem Plan?

A tandem plan was a mortgage purchase program subsidized by the United States government. Under a tandem plan or program, the Government National Mortgage Association (GNMA), colloquially known as Ginnie Mae, bought mortgages at a discounted market price and then sold 🉐them through the Federal National Mortgage Association (FNMA), better known as Fannie Mae, and the Federal Home Loan Mortgage Corp. (FHLMC), usually called Freddie Mac.

In effect, GNMA footed the difference between the purchase and sale price of the mortgages that it bought. This type of struc🌠ture allowed for extremely low interest rates, making the loans available to aspiring homebuyers who wouldn't otherwise be able to afford them.

Ginnie Mae first launched a series of tandem plans in 1970. Congress created the major program for conforming loans, officially known as the Brooke-Cranston GNMA Tandem Plan, in 1974 with the passage of the Emergency Home Purchase Assistance Act. As of 2024, new loans aren't being funded through the Brooke-Cranston Tandem Plan, though the concept of special assistance programs still exists. A similar plan could be revived should the mortgage money supply become too tight.

How Tandem Plan Loans Worked

Tandem loans provided monetary assistance to builders and developers of nonprofit public housing. Interest reduction payments could be made for a rental or cooperative housing project, owned by a private nonprofit entity, a limited distribution entity, or a cooperative housing corporation, which is financed under a state or local program that assists with loans, loan insurance, or tax abatement.

To qualify for interest reduction payments, a project was required to be submitted for approval prior to completion. Projects didn't need to be financed with HUD-FHA insured mortgages, and HUD-FHA would recognize the organization and operat🍒ion of the project under state or local programs to the extent they weren't inconsistent with the National Housing Act.

Alternatives to the Tandem Plan

While new tandem loans are no longer issued, some other programs aimed directly at buyers𝔉 have since been 🗹implemented.

For rental housing, there's the housing choice voucher program​​​​​​​, the federal government's major program for assisting very low-income families, the elderly, and the disabled to afford decent, safe, and sanitary housing in the private market.

Since housing assistance is provided on behalf of the family or individual, participants can find their own housing, including single-family homes, townhouses, and apartments. The participant is free to choose any housing that meets the requirements of the program and isn't limited to units located in subsidized housing projects.

The Bottom Line

A tandem plan was a mortgage purchase program run by the U.S. government, in which the GNMA, or Ginnie Mae, bought mortgages at a discount to the market price and then sold them through the FNMA, or Fannie Mae, and the FHLMC, or Freddie Mac. Ginnie Mae covered ꦜthe difference between the purchase and sale price, facilitating very low home rates and enabling buyers who would normally not be able to afford a mortgage to buy a home. Tandem plans assisted builders and developers of nonprofit public housing. The program is no longer in effect.