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Federal National Mortgage Association (FNMA)

By Kimberly Amadeo, About.com

What Fannie Mae Is:

Fannie Mae is short for Federal National Mortgage Association (FNMA). It was created in 1938 to establish a secondary market for mortgages insured by the Federal Housing Administration(FHA). In 1968 it became a shareholder-owned company that can buy any mortgages, not just those insured by the government. It is listed on the NYSE.

What Fannie Mae Does:

Fannie Mae buys mortgages from banks, a process known as buying on the secondary market. It then packages these into mortgage-backed securities, and resells them to investors on Wall Street. Fannie Mae also provides financing for development of affordable rental housing. A certain percentage of Fannie Mae’s mortgages must serve low and moderate-income families.

How Fannie Mae Affects the U.S. Economy:

Fannie Mae stimulates the housing market, which comprises 10% of the economy. By doing so, it creates wealth for homeowners who receive greater equity from higherpriced homes. It also allows low and moderate income families to get a financial cushion beneath them, and a higher standard of living, in the form of home ownership.

How Fannie Mae Affects You:

Fannie Mae helps you in two ways:
  1. If you are a homeowner, then Fannie Mae helps keep mortgage costs low by making funding for mortgages more readily available.
  2. If you are a low or moderate income family, teacher, police officer, firefighter or health care worker, Fannie Mae will provide you with a mortgage you couldn’t otherwise afford.

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