Fannie Mae

Type: Public
Founded: 1938
Headquarters: Washington, D.C.
Key people: Herbert M. Allison
Industry: Credit Services
Products: Financial Services
Website: www.fanniemae.com/

General Information

The Federal National Mortgage Association (FNMA) (NYSE: FNM), commonly known as Fannie Mae, is a stockholder-owned corporation chartered by Congress in 1968 as a government sponsored enterprise (GSE), but founded in 1938 during the Great Depression. The corporations's purpose is to purchase and securitize mortgages in order to ensure that funds are consistently available to the institutions that lend money to home buyers.On September 7, 2008, James Lockhart, director of the Federal Housing Finance Agency (FHFA), announced that Fannie Mae and Freddie Mac were being placed into conservatorship of the FHFA. The action is 'one of the most sweeping government interventions in private financial markets in decades'. As of 2008, Fannie Mae and the Federal Home Loan Mortgage Corporation (Freddie Mac) owned or guaranteed about half of the U.S.'s $12 trillion mortgage market.

The mortgage crisis from late 2007

Following their mission to meet federal Housing and Urban Development (HUD) housing goals (HUD government goals), GSE's such as Fannie Mae, Freddie Mac and the Federal Home Loan Banks (FHLBanks) have strived to improve home ownership of low and middle income families, underserved areas, and generally through special affordable methods such as 'the ability to obtain a 30-year fixed-rate mortgage with a low down payment... and the continuous availability of mortgage credit under a wide range of economic conditions.' (HUD 2002 Annual Housing Activites Report) Then in 2007, the subprime mortgage crisis began. An increasing number of borrowers, often with poor credit that were unable to pay their mortgages - particularly with adjustable rate mortgages (ARM), caused a precipitous increase in home foreclosures. As a result, home prices declined as increasing foreclosures added to the already large inventory of homes and stricter lending standards made it more and more difficult for borrowers to get mortgages. This depreciation in home prices led to growing losses for the GSEs, which back the majority of US mortgages. In July of 2008, the government attempted to ease market fears by reiterating their view that 'Fannie Mae and Freddie Mac play a central role in the US housing finance system'. The Treasury Department and the Federal Reserve took steps to bolster confidence in the corporations, including granting both corporations access to Federal Reserve low-interest loans (at similar rates as commercial banks) and removing the prohibition on the Treasury Department to purchase the GSEs' stock. Despite these efforts, by August 2008, shares of both Fannie Mae and Freddie Mac had tumbled more than 90% from their one-year prior levels.