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.

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Of late the foreclosure related housing crisis has caused innumerable evictions resulting in thousands – if not millions, being rendered homeless. During the time of the housing boom the mantra had been to own a house. This has always been the great American dream and the very basis of its psyche. The sub-prime mortgage debut was accelerated with the pushing on of this dream into an absurd reality. Those without any income credentials were sanctioned loans to buy houses. The idea was to get the money flowing from the mortgage institutions to artificially balloon up the housing industry. The shrewd thinking was that either way the lenders benefited. If borrowers remained current on mortgage loans then money would be coming in at a high rate because the value of the houses had been falsely appreciated. If borrowers defaulted then the lenders would seize the property and sell at a higher rate. The logic was based on a naive belief that real estate prices could never come down. But this is exactly what happened.

With so many turning homeless overnight because of foreclosures suddenly the demand for rentals shot up. The greater the demands for rental the more did it indicate that foreclosures were on the rise.

Meanwhile the government at state, local and federal levels as well as the communities pitched in to contain foreclosures. There were massive relief measures. It is an ongoing process with the latest being the mother of all bailouts – the $700 billion package. It is difficult to gauge how far effective the previous efforts that have been in circulation since the last one-year is being successful. Rental vacancies can be taken as a tentative yardstick. If the rental vacancies are increasing then it indicates that the foreclosure weather clouds are perhaps clearing. It shows two things – less number of people is suffering foreclosure evictions and or sale of houses are picking up causing affordable housing to be available for the ordinary American.

Writing rental cheques does not have any benefits like tax deductions or increase in equity of the house. That is why Americans have always wanted to own houses. Rents have been the highest in New York City and San Francisco. It has risen by 6.6% since last year. In the Bay area the increase has been by 7.8%. This shows that the landlords dictate the market. In Columbus, Ohio the rents are slightly lower.

According to a survey conducted by Marcus & Millchap of Encino, California rental data was collected from 40 largest cities of America for 2007. Estimated figures for 2008 were taken including vacancy rates, new building project and job potentials. Of these three, it is the vacancy numbers that affect price rise. In the sales zone an inventory of 5% unsold units means a glut. In the rental world 5% vacancy rate point to a healthy market.

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