What Is Fannie Mae?:
Fannie Mae is short for Federal National Mortgage Association (FNMA). It was created in 1938 to
establish a secondary
for mortgages insured by the Federal Housing Administration(FHA). In 1968, Fannie Mae became a shareholder-owned company that coudl buy any mortgages, not just those insured by the government. It was even 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
, 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:
Before the crisis, Fannie Mae stimulated the housing market, which made up 10% of the economy
before the crisis. By doing so, it created wealth for homeowners who received greater equity from higher-priced homes. Fannie Mae also allowed low and moderate income families to get a financial cushion beneath them, and a higher standard of living, in the form of home ownership.
Since the crisis, Fannie Mae keeps the housing industry on life support. As of 2010, housing only made up 2% of the economy. Fannie Mae and another similar government-owned enterprise, Freddie Mac
, now guarantee 90% of all mortgages. In other words, banks (which lent to just about everyone with a pulse) now won't lend anyone without a government guarantee.
How Fannie Mae Affects You:
Fannie Mae helps you in two ways:
(Article updated April 2, 2010)
- If you are a homeowner, then Fannie Mae helps keep mortgage costs low by making funding for
mortgages more readily available.
- 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.