Real Estate Glossary

What's Fannie Mae?

Fannie Mae (Federal National Mortgage Association) is a government-sponsored enterprise (GSE) that was created to support the housing market by providing liquidity to mortgage lenders. Fannie Mae operates in the secondary mortgage market, which means it buys mortgages from primary lenders, such as banks and credit unions, and repackages them as mortgage-backed securities (MBS) to be sold to investors.

By buying mortgages from primary lenders, Fannie Mae helps to free up funds so that those lenders can make more loans to borrowers. The secondary market for mortgages allows for a greater diversity of financial institutions to participate in lending, making it more likely for mortgages to be approved. By issuing MBS, Fannie Mae also allows smaller investors to invest in mortgages and to share the risk of mortgage defaults.

The purpose of Fannie Mae is to promote stability and affordability in the housing market. This is accomplished by making it easier for borrowers to obtain mortgages and by making it possible for investors to buy mortgages. The company also works to promote affordable housing for low- and moderate-income families.

It's important to note that in 2008 Fannie Mae was placed into conservatorship by the Federal Housing Finance Agency (FHFA), which has since been responsible for managing the company and it's now owned by the U.S government, but it still operates as a separate legal entity.

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