QandAs: Loans

Who is Fannie Mae and what do they do?

Answer:
Fannie Mae is a government-sponsored secondary

mortgage market that purchases home loans from mortgage lenders. Mortgage companies and banks originate home loans. However, these financial institutions seldom retain mortgage notes within their portfolio. Instead, notes are sold to a secondary market. This common loan practice ensures a lending institution's survival, in which the company maintains enough funds to originate future loans.

Even though a lender may hold the loans it originates, a large share of home loans are sold to secondary mortgage markets such as Fannie Mae. Fannie Mae's main objective is to expand the U.S housing market. In connection with this objective, Fannie Mae offers various mortgage programs to help low and middle-income families realize their dream of homeownership. Programs to increase affordability include zero down home loans, low mortgage insurance (PMI), and the new 40-year loan term.

The company was founded in 1968 at a time when the supply of mortgage funds were low and many Americans could not afford to buy a home. The government established Fannie Mae as a channel to improve the U.S economy and increase homeownership. Company funds come from private investors and shareholders, and ongoing financial support allows Fannie Mae to operate as a secondary mortgage market


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