What Does Fannie Mae Stand For

What does Fannie Mae stand for? It is an acronym for the Federal National Mortgage Association. It was established in 1938 during the Franklin Delano Roosevelt administration, as part of the New Deal. When the U.S. housing market imploded during the Great Depression, private lenders were generally unwilling to lend money to people with lower incomes or unstable credit histories. Fannie Mae was privatized in 1968 but operates as a government-sponsored enterprise.

At first Fannie Mae was conducted like a savings and loan organization, but on a national basis. It permitted individual banks to grant considerably lower interest rates on mortgages. With this process, the secondary mortgage market was established. In the secondary mortgage business, enterprises like Fannie Mae and Freddie Mac can borrow funds from non-American investors at very reasonable rates, due to the economic support provided by the federal government. Because it is able to borrow money at low rates, Fannie Mae can issue fixed-rate mortgages with smaller down payments. A profit is made from the difference between what foreign lenders charge and the interest rate money paid by homeowners.

Fannie Mae is organized in these segments: Single-Family Credit Guaranty, Capital Markets as well as Housing and Community Development. In the Single-Family Guaranty area, single-family home mortgages are securitized into the organization’s mortgage-backed securities. This helps to facilitate Fannie Mae’s buying of single-family loans for its mortgage portfolio. Fannie Mae’s Capital Markets division oversees and directs investments for the company in the areas of mortgages, securities, liquidity positions and debt financing. In Housing and Community Development, multi-family mortgages are securitized into mortgage-backed securities, enabling the buying of multi-family mortgages for Fannie Mae.

The charter of Fannie Mae was revised in the 2008 Housing and Economic Recovery Act. There are now two different groups of limits for first-time mortgages. These limits are for general conforming loans and higher-cost area conforming loans, and are applicable to conventional mortgages deliverable to Fannie Mae on or subsequent to January 1, 2010.