Fannie Mae - Federal National Mortgage Association

The Federal National Mortgage Association is better known by the name Fannie Mae. As you can guess, Fannie Mae is the pronunciation of the acronym FNMA.
What isn’t widely known is that the FNMA is considered a government sponsored enterprises (GSE). It isn’t the only GSE created by Congress but it is probably the best known because of its role in the mortgage arena.

Originally created in 1938, under President Franklin D. Roosevelt, its function today is to enhance the flow of credit to targeted sectors of the economy. It is not the oldest GSE however. That distinction belongs to the Farm Credit System created in 1916.
Together there are fifteen GSEs functioning in the residential mortgage market. They are Freddie Mac and the 12 Federal Home Loan Banks. In aggregate, they have several trillion dollars of on-balance sheet assets. By the way, even though there are 12 Federal Home Loan Banks, the perception is they are considered only as one. Regardless, they are all GSEs.

Even though Fannie Mae was re-chartered in 1968 by Congress as a shareholder-owned company, it is still classified as a GSE. Today it is funded solely with private capital raised from investors on Wall Street and around the world.

It enjoys the benefits of a privately-owned corporation in that it is authorized to make loans and loan guarantees. Although it has the status of a GSE, it is not backed or funded by the U.S. government. And, the securities it issues do not benefit from any explicit government guarantee or protection. However the perception of government guarantee does not hurt its reputation.

Fannie Mae is quick to remind anyone who will listen that the government established it in order to expand the flow of mortgage funds in all communities, at all times, under all economic conditions, and to help lower the costs to buy a home.

Some would argue it has been too successful in its mission causing risky loans to be made. That may or may not be and isn’t really the focus of this article.

Fannie Mae is proud of its federal charter and proud that it operates in America’s secondary mortgage market to ensure that mortgage bankers and other lenders have enough funds to lend to home buyers at low rates. It tells you this on their website.

Some would argue that without Fannie Mae many Americans would not be homeowners. That could be given FNMA has stepped up to the plate and provided a service in demand by the American consumer.

Suffice it to say, Fannie Mae is an organization that is the 800 pound gorilla in the American housing market. Every lender in America adheres to Fannie Mae standards whether or not Fannie Mae insures their loans. Her fingers are in every office whether that is a one person office or a behemoth like international banks.

Who is Fannie Mae? She is the lady that may be the reason you are in your home right now.