Title:
Fannie Mae –
Supporting Homeownership Through Mortgages
Word Count:
491
Summary:
The federal
national mortgage association, better known as Fannie Mae, is an integral part
of the mortgage industry. Here’s an overview on Fannie Mae and what it does.
Keywords:
fannie mae,
federal national mortgage association, mortgage, mortgages, home loans, loan
Article Body:
The federal
national mortgage association, better known as Fannie Mae, is an integral part
of the mortgage industry. Here’s an overview on Fannie Mae and what it does.
Fannie Mae – Providing A Little Help
Throughout the history of the United States, federal and state governments have
used financial programs to modify our behavior. While it sounds draconian, it
is actually a fairly bland concept. To stop us from undertaking bad or
unhealthy behavior, taxes are levied on things such as cigarettes to motivate
us to stop smoking. On the positive side, similar financial incentives are
create to promote positive things such as homeownership.
Homeownership is often referred to as the American Dream. In truth, it is one
of the key factors in maintaining a middle class in our country. Homeownership
is, more or less, an involuntary savings plan for most Americans. Property
appreciates over time which means you are gaining wealth regardless of what you
are doing with your credit cards.
Today, more of us own homes than at any point in history. This is due to a
number of factors, one of which is the broad availability of mortgages in which
we can borrow large sums of money over long periods of time. The federal
government through Fannie Mae among other institutions promotes this
opportunity.
A common mistake is to assume Fannie Mae is a government entity. It is not. The
company is a publicly traded entity just like Microsoft, Google or your
favorite stock.
A second misconception is that Fannie Mae provides mortgages directly to
borrowers. Again, it does not. Instead, the company provides liquidity to
mortgage lenders so they can continue to provide you with home loans.
Fannie Mae was created in 1938 by the federal government. Its purpose was to
provide liquidity [money] to a secondary mortgage market. If you’ve ever had a mortgage, you probably
have experienced the odd event where your mortgage is sold to another lender.
These secondary lenders rarely work directly with the public. Instead, they buy
mortgages after the application process and collect the payments. In creating Fannie Mae, the government
desired to make sure there was enough money in the secondary market to keep the
mortgage industry operating smoothly. To this end, Fannie Mae was specifically
charged with the task of buying mortgages insured by the Federal Housing
Administration, better known as FHA.
In 1968, Fannie Mae went private and expanded the secondary mortgage operation
by purchasing both FHA loans and non-FHA instruments. This evolution made
Fannie Mae a major player in the mortgage industry. Since going public, it has
purchased more than 63 million mortgages, which has helped put a lot of our
fannies in homes.
While Fannie Mae is a publicly traded company, it is still tied to the federal
government through a congressional charter. The charter allows Congress to
oversee Fannie Mae and make sure it is following its initial purpose. Fannie
Mae, however, receives none of our taxes.