About Fannie Mae Mortgages
When shopping for real estate loans, consumers often ask questions about Fannie Mae, Ginny Mae, FHA and Freddy Mac. Since Fannie Mae and Freddie Mac were put under the conservatorship of the Federal Housing Finance Agency, even those not in the housing market are asking questions about the various associations. One common misconception is that Fannie Mae provides loans to home buyers. While it provides funds indirectly, Fannie Mae does not make loans to home buyers.
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Identification
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Fannie Mae is a nickname for the Federal National Mortgage Association (FNMA). The nickname is derived from its acronym, FNMA, which might be loosely pronounced Fannie Mae. Fannie Mae was a private corporation that dealt with the purchase of first mortgages, operating in the secondary market where mortgages are purchased from lenders. Those mortgages were then held in Fannie Mae's portfolio.
Function
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The purpose of the Federal National Mortgage Association was to purchase the first mortgage from lenders so that the lenders could then use the money to make more mortgages, which would create more opportunities for home buyers. The mission of Fannie Mae was to remove barriers to home ownership, lower lending costs and increase the possibility for home ownership and affordable housing for all Americans.
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History
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The Federal National Mortgage Association was founded during the Depression, in 1938. It became a stockholder-owned corporation in 1968. Chartered by Congress, Fannie Mae was a government-sponsored enterprise. A government-sponsored enterprise is a financial services corporation that is initially created by the United States government. Its purpose is to assist the flow of credit to specific sectors of the market. On September 7, 2008, the financial crisis of FNMA caused it to be put into conservatorship of the Federal Housing Finance Agency.
Types
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Fannie Mae includes three types of businesses. They are Single-Family, Housing and Community Development, and Capital Markets. These three businesses work together to provide products, services and solutions for their lenders and housing partners. One goal is to increase the supply of affordable rental housing, another is to reduce down payment requirements for home buyers and a third is to improve mortgage terms.
Significance
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An increasing number of borrowers with poor credit were put into adjustable rate mortgages. As the economy took a downturn and housing prices fell, those buyers were unable to refinance their adjustable loans, and a significant number of foreclosures began to result. As more foreclosures occurred, housing values continued to drop, throwing more home buyers into a position of owing more for their homes than what they were worth. When it became evident that Fannie Mae held a large number of these papers, the federal government felt it was necessary to step in and put the association under conservatorship. This was the first of several major government interventions in the private financial markets to occur in recent times.
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