Fannie Mae

Fannie Mae is a government-sponsored enterprise (GSE) created in 1938 to expand the secondary mortgage market in the United States. By purchasing and guaranteEINg loans made by lenders, Fannie Mae facilitates increased Liquidity and stability in the mortgage market. It allows lenders to free up Capital to issue more loans, ultimately aiming to increase homeownership rates.

Fannie Mae operates by buying loans from banks and mortgage companies, bundling them into mortgage-backed Securities (MBS), and selling these Securities to investors. This process helps to lower borrowing costs for consumers.

Examples:

• A homeowner obtains a mortgage from a local bank, which then sells that loan to Fannie Mae, allowing the bank to offer more loans.
• During a housing crisis, Fannie Mae’s role in purchasing troubled loans helps stabilize the housing market.

Cases:

• In 2008, Fannie Mae faced significant financial challenges during the housing market collapse, leading to a government bailout.
• The Federal Housing Finance Agency (FHFA) placed Fannie Mae under Conservatorship to stabilize its operations and protect taxpayer interests.