Fannie Mae

A private agency that is congressionally chartered to promote home ownership among low to moderate income people. It buys home mortgage loans in the private market that aren’t insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA). Fannie Mae may retain the mortgages for a short period of time, but most of the mortgages are packaged and resold to investors in the market as mortgage-backed securities. By reselling the mortgages it purchases from the primary issuers, Fannie Mae gives banks and savings and loans the ability to issue more mortgages. Fannie Mae offers additional programs to encourage home ownership among low-income people.

Originally created in 1938 by Congress to bolster the housing industry after the Great Depression, Fannie Mae was part of the Federal Housing Administration (FHA) and authorized to purchase only FHA-insured loans. In 1968, it became a private company operating with private capital whose role is to buy mortgages beyond government-linked mortgages and to establish a national secondary market for government-insured mortgages. Fannie Mae’s debt is perceived to be nearly as safe as U.S. Treasury debt, which allows it to pay lower interest rates to its debt holders. Even though Fannie Mae is now a private company that continues to be active in the secondary market for conventional and FHA and VA loans, it still operates under a congressional charter and the Department of Housing and Urban Development and the U.S. Treasury Department continue to have oversight of the agency.