Explore Fannie Mae's role in enhancing mortgage market liquidity, supporting affordable housing, and impacting homeownership.
Fannie Mae, officially known as the Federal National Mortgage Association (FNMA), is a government-sponsored enterprise (GSE) established in the United States in 1938 as part of the New Deal. Its primary function is to expand the secondary mortgage market by securitizing mortgage-backed securities (MBS) mortgages, allowing lenders to reinvest their assets into more lending and increasing the number of lenders in the mortgage market.
Originally a federal agency, Fannie Mae was converted into a publicly traded company in 1968, operating with private capital on a cooperative basis. However, following the 2008 financial crisis, Fannie Mae was placed into conservatorship under the Federal Housing Finance Agency (FHFA), which now oversees its operations.
Fannie Mae has faced criticism and financial difficulties, most notably during the 2008 financial crisis, when it suffered significant losses due to its exposure to high-risk mortgages. Its role in the mortgage market and the extent of government involvement and backing continue to be subjects of political and economic debate.
Despite these challenges, Fannie Mae plays a critical role in the U.S. housing market, supporting mortgage lending and homeownership for millions of Americans. Its efforts to promote affordable housing and stabilize the mortgage market remain essential components of the national economy.
While Fannie Mae and Freddie Mac similarly promote liquidity in the mortgage market, they operate under different charters and were established at different times. Freddie Mac was created in 1970 to provide competition and limit Fannie Mae's monopoly in the secondary mortgage market.
No, Fannie Mae does not lend directly to borrowers. Instead, it buys mortgages from lenders to ensure they have the funds to lend to more homebuyers.
If your mortgage is sold to Fannie Mae, the terms of your mortgage do not change. You may send your monthly payments to a different address if your lender changes your mortgage servicer, but your loan's interest rate, duration, and other terms remain the same. Fannie Mae's mortgage ownership mainly affects the secondary market, not the borrower's daily interactions with their loan.
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