Fannie Mae, formerly known as the Federal National Mortgage Association, was created in 1939 by President Franklin D. Roosevelt and Congress following the Great Depression. After the stock market crashed in 1929, the American banking crisis began as a tremendous amount of investors withdrew their deposits from banks, substantially decreasing the money supply. Furthermore, the banking crisis deepened as businesses and farmers began to turmoil and installment loans were not being paid. As a result, banks refused to lend and borrowers failed to meet their mortgages, leading to foreclosures all around the U.S. Thus, Fannie Mae was created to buy mortgages from lenders to free up capital that could go to borrowers in need of housing.
Today, this government-sponsored enterprise is one of the leading sources of financing for mortgage lenders, expanding the liquidity of mortgage loan money by purchasing mortgages from banks and selling them. This way, banks can be paid back much sooner than it takes for borrowers to fully pay back their loans and loans can be distributed more frequently. Fannie Mae has two primary businesses that they offer to lenders, which are single-family business and multi-family business.
While the single-family business portion offers a variety of mortgage loans for homebuyers and homeowners, the multifamily business side offers financing for multifamily rental housing. While borrowers cannot directly obtain loans or mortgages from Fannie Mae, they can through lenders receiving incoming funds from the program. Together, these home loans can provide affordable housing to low and middle-income Americans. To learn all you need to know about different Fannie Mae loans and how they work, make sure to download our comprehensive guides.
Fannie Mae 101
Fannie Mae, also known as the Federal National Mortgage Association (FNMA), is a government-sponsored enterprise (GSE) that was created in 1939 to promote a secondary market for home loans. It was established after the Great Depression, a time when a quarter of Americans lost their homes due to debt. Banks were collapsing at an alarming rate and were unable to provide mortgages to even the most qualifying homebuyers. Fannie Mae purchased mortgages from banks to clear up debt and provided them with enough supply to continue issuing loans. In 1989, Freddie Mac was established to prevent FNMA from becoming a monopoly.
Today, these enterprises are the leading sources of liquidity for the housing market, owning or insuring trillions of dollars in home loans. Fannie Mae purchases and sells mortgages to investors through mortgage-backed securities (MBS). In efforts to reduce high-risk mortgages, the company enforces a comprehensive underwriting process for lenders to follow. Read More
Guide to Fannie Mae Home Loans
Fannie Mae plays a critical role in the world of mortgages and homeownership. However, many homeowners may not even realize their mortgages are backed by the company. This is because Fannie Mae mostly interacts with lenders and investors and not directly with borrowers. As a result, homeowners may never interact with the government-sponsored enterprise. Because it mostly operates behind-the-scenes, it can be difficult to realize how important this organization is to the entire housing market. Nevertheless, if Fannie Mae mortgages were to disappear, it would mean bad news for many homeowners. As a potential homeowner, learning the role this company plays in the mortgage economy could shed light on how it affects you. Find out everything you need to know about FNMA home loans by downloading our guide here.
If you are interested in getting a mortgage, you should learn about how Fannie Mae impacts your mortgage options. The sections within explain how to apply for a Fannie Mae-backed home loan and what the benefits are. You will also learn what role the company plays in the mortgage economy and how it operates to make homeownership accessible. Read More
Fannie Mae for Lenders
When individuals or families are ready to become homeowners, they will likely need the help of mortgage lenders in order to finance their purchase. A mortgage is a loan that is specifically taken out to buy a new home, and mortgages are traditionally paid monthly over a series of several years. Lenders distribute loans to qualified applicants who will repay the money, with interest, over an established period of time.
Sometimes, a lender may need to replenish funds so that they can provide more mortgage loans to potential homeowners. That is where the Federal National Mortgage Association, also known as FNMA or Fannie Mae, steps in. Fannie Mae is a government-sponsored enterprise (GSE) that helps moderate- to low-income borrowers acquire mortgages. It also works to stimulate the housing market. One of its most important functions involves buying loans from lenders, which frees up funds for these lenders to create more loans in the future. Investing in the mortgage market creates more liquidity for lenders, while also preventing them from using unethical subprime lending practices. Read More
Fannie Mae Resources for Homebuyers
The Federal National Mortgage Association, more commonly known as Fannie Mae, helps banks and other mortgage lenders provide mortgage loans to homebuyers. While the FNMA does not directly work with borrowers and homebuyers, it does offer resources to guide buyers in their home buying and owning journey. Fannie Mae mortgage loans are primarily for low-income buyers but the tools the association offers can be beneficial to anyone on their home-owning journey.
Fannie Mae offers low-payment options for buyers through the HomeReady program. This program is reserved for families and individuals within a certain income range. FNMA also lists its own acquired properties. These are Fannie Mae foreclosure properties which typically require lower mortgage payments. The HOME by Fannie Mae is an award-winning app created by the FNMA to provide assistance and a visual guide for the home-owning journey. Read More