Fannie Mae

Financial Dictionary -> Mortgages -> Fannie Mae

Founded in 1938 Fannie Mae is the abbreviated term that refers to the Federal National Mortgage Association, which is located in Washington D.C, United States. Fannie Mae is a publicly floated, federal chartered, government-sponsored corporation that purchases mortgages from financial institutions, consolidates them and finally sells them on as mortgage-backed securities to investors through the open market. The Fannie Mae is currently listed on the New York Stock Exchange as FNM.

Going by 2007 data, the Fannie Mae has revenue of $44.8 billion, and total assets worth 882.5 billion. However, due to the subprime mortgage crisis that took hold from late 2007, they have reported a $5.1 billion loss in operating income and $2 billion in net income.

James Lockhart, the director of the Federal Housing Finance Agency announced, On September 7, 2008, that the Fannie Mae and its brother the Freddie Mac were being put in to conservatorship of the FHFA. This was considered a colossal governmental intervention.

Fannie Mae operates by purchasing loans from authorized Mortgage lenders, either by money or by exchanging them for mortgage backed securities that consolidate the loans. On top of this for a fee, they carry the Fannie Mae guarantee of payment of interest and principal amount on time. Mortgage lenders may keep that security in a portfolio or sell it on. The Fannie Mae might also turn mortgages from its own loan portfolio in to securities and sell these mortgage backed packages to investors as securities on the mortgage market, once again guaranteeing that all payments will be made to the investor on time. By buying the mortgages, the Fannie Mae and its counterpart Freddie Mac give banks and other financial lenders the access to new money for more loans, thus giving the US mortgage and credit economies more liquidity.