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Line 21: − − ==See also== − *[[Community Reinvestment Act]]
loan bundling & the CRA
'''Fannie Mae''' is the common name for the Federal National Mortgage Association (FNMA). <ref>[http://www.visualthesaurus.com/cm/wordroutes/1529/ Blaming Fannie and Freddie], Ben Zimmer, ''Visual Thesaurus'', September 16, 2008</ref> Fannie Mae is a company that deals with the secondary [[mortgage]] market. It is a [[New Deal]] agency founded by the U.S. government to provide increased liquidity for mortgages. The company was bailed out by the US Government (along with [[Freddie Mac]]) after making billions in loans available to borrowers with demonstratively poor credit histories. It was placed in the [[conservator]]ship of another government sponsored enterprise, the Federal Housing Finance Agency (FHFA) for mismanaging its affairs in September 2008. It currently guarantees against default about $5 trillion in mortgages of American homeowners -- nearly half of all mortgages in the [[United States]].
'''Fannie Mae''' is the common name for the Federal National Mortgage Association (FNMA). <ref>[http://www.visualthesaurus.com/cm/wordroutes/1529/ Blaming Fannie and Freddie], Ben Zimmer, ''Visual Thesaurus'', September 16, 2008</ref> Fannie Mae is a company that deals with the secondary [[mortgage]] market. It is a [[New Deal]] agency founded by the U.S. government to provide increased liquidity for mortgages. The company was bailed out by the US Government (along with [[Freddie Mac]]) after making billions in loans available to borrowers with demonstratively poor credit histories. It was placed in the [[conservator]]ship of another government sponsored enterprise, the Federal Housing Finance Agency (FHFA) for mismanaging its affairs in September 2008. It currently guarantees against default about $5 trillion in mortgages of American homeowners -- nearly half of all mortgages in the [[United States]].
==Loan bundling==
Fannie does not lend money directly to consumers. Instead, it purchases bundles of loans that banks make on what is called the secondary market. Fannie Mae issues Guidelines to mortgage lenders on the documentation required from borrowers to conform to what Fannie Mae agrees to buy.<ref>[http://www.fanniemae.com/portal/about-us/company-overview/about-fm.html Who is Fannie Mae Today?] About Us. www.fanniemae.com</ref> Qualifying guidelines primarily focus on income, credit reports, and loan to value.<ref>Loan to Value (LTV); loan size in relation to the properties appraised value. For example, at the time of the 2008 crash, 80% financing, or 80% LTV was the maximum amount Fannie Mae guidelines would approve for borrowers with qualifying credit scores without mortgage insurance (also known as foreclosure insurance, which can significantly increase the monthly payment). LTV thus can be manipulated through an inflated appraisal.</ref> By Fannie Mae guaranteeing purchase of bundles of mortgages from banks, lenders funds are quickly replenished and they are able to originate more loans.
When Fannie Mae purchases a mortgage from a loan originator, it is repackaged and sold in bundles to investment banks and other entities who market them globally with a credit rating stamp.<ref>True story. You can watch [http://www.hulu.com/watch/59026/cnbc-originals-house-of-cards CNBC's House of Cards special here] to see it; reporter David Faber travels to the small town of Narvik, Norway, which invested $200 million lured in by their AAA ratings and the assurance by Citigroup of their safety. The town has had to close schools, slash expenditure to the elderly, and cut back on fire department hours. </ref>
==Fannie Mae lowers guidelines for subprime borrowers==
:''Main article:'' [[Community Reinvestment Act]]
In 1999 Fannie Mae lowered its underwriting guidelines to expand into the subprime lending market,<ref>[http://www.nytimes.com/1999/09/30/business/fannie-mae-eases-credit-to-aid-mortgage-lending.html Fannie Mae Eases Credit To Aid Mortgage Lending,] Steven A. Holmes, ''New York Times'', September 30, 1999.</ref> a widely held contributing factor to the banking crisis of 2007-08.
==Fraudulent accounting 1998 -2006==
==Fraudulent accounting 1998 -2006==
==References==
==References==
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{{reflist|2}}
[[Category:Economics]]
[[Category:Economics]]