Fannie Mae: Helping Families to Secure Homes Since 1938
Fannie Mae sounds like a girl’s name but it is only a colloquial term for Federal National Mortgage Association (FNMA). Before buying homes with their aid, it would be best to know a little history of the institution to provide a background before trusting them.
Fannie Mae started in 1938. During the Great Depression, President Franklin Delano Roosevelt implemented economic policies to increase the number of Americans who own homes and at the same time allowing lenders to lend money by using the government’s money. The creation of Fannie Mae also makes owning a home much more affordable for people and at the same time giving confidence to lenders to invest in home loans in the wake of recession. It was part of the President’s New Deal to make mortgage markets to be more liquid and stable, which is essential in the recovery during Great Depression.
In 1968, Fannie Mae has been chartered by Congress as a Government-Sponsored Enterprise (GSE) which means that its securities are open to public for sale. This allowed the government to have more funds to use for lending and to take out some federal money capital to fund the Vietnam War. Later on, Freddie Mac or Federal Home Loan Mortgage Corporation has been established to compete with Fannie Mae. Like Fannie Mae, Freddie Mac is also a government-sponsored enterprise.
For years, Fannie Mae had implemented a lot of changes when it comes to improving home ownership of the Americans, which includes reaching out and giving low income borrowers a chance to own houses, as well as enforcement of standards in mortgages and taking risks. Like any other business, Fannie Mae had its fair share of bad decisions on the risks it took that made it lost hundred millions of dollars. But being controlled by the government, it received aid through the Federal Reserve to make sure that its borrowers and lenders are not affected. The borrowers also benefit from amendments of the laws on housing, and Fannie Mae being a GSE, it has some control over the implementations on how it does business to its clients. Fannie Mae foreclosures could not be avoided but the institution does everything it could so that the borrower would be able to pay for the mortgage. Usually, Fannie Mae reassesses the loan terms and coordinates with the banks to stretch a little. It may be a little spoiled but it is a great opportunity for people who are very willing to own a home with the aid of taxes.
