Fannie Mae

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Fannie Mae is the common name for the Federal National Mortgage Association (FNMA). [1] 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. Although remaining a government sponsored entity (GSE), the company began selling stock to the public in 1968. Fannie Mae has been described as middle class welfare.[2]

The company and its reputation were kept alive by the US Government (along with Freddie Mac) after making billions in loans available to borrowers with demonstratively poor credit histories. Many individuals and pension funds globally, who bought into the illusion of safety and security in a government backed entity, were wiped out when it faltered. It was placed in the conservatorship of another government sponsored enterprise, the Federal Housing Finance Agency (FHFA), in September 2008, for mismanaging its affairs. 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
  1. Blaming Fannie and Freddie, Ben Zimmer, Visual Thesaurus, September 16, 2008
  2. Middle-Class Welfare State Is Invisible by Design, Ezra Klein, Bloomberg, 2012-03-01.