Fannie Mae

See Federal National Mortgage Association.

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Fannie Mae

1. A private, shareholder-owned company created by Congress in 1938 to bolster the housing industry during the depression. Fannie Mae facilitates homeownership by adding liquidity to the mortgage market when it purchases loans from lenders who use the funds received to make additional loans. Fannie Mae finances mortgage purchases by issuing its own bonds or by selling mortgages it already owns to financial institutions. The firm's common stock trades as FNM on the New York Stock Exchange. Formerly called Federal National Mortgage Association. See also quasi-public corporation.

2. A security issued by this company that is backed by insured and conventional mortgages. Monthly returns to holders of Fannie Maes consist of interest and principal payments made by homeowners on their mortgages.

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Fannie Mae

Informal for Federal National Mortgage Association or FNMA. A publicly-traded company chartered by the U.S. Congress to guarantee mortgages granted to low- or middle-income households. In order to do this, it buys mortgages and repackages them, selling them as mortgage-backed securities. It also maintains its own portfolio of mortgage-backed securities. With the collapse of the housing bubble, Fannie Mae was placed in federal receivership in 2008 as a result of overexposure to this market. See also: Freddie Mac, Community Reinvestment Act, Credit crunch.

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Fannie Mae. Fannie Mae has a dual role in the US mortgage market.

Specifically, the corporation buys mortgages that meet its standards from mortgage lenders around the country. It then packages those loans as debt securities, which it offers for sale, providing the investment marketplace with interest-paying bonds.

The money Fannie Mae raises by selling these bonds pays for purchasing more mortgages. Lenders use the money they realize from selling mortgages to Fannie Mae to make additional loans, making it possible for more potential homeowners to borrow at affordable rates.

Because lenders want to ensure their mortgage loans are eligible for purchase, most adopt Fannie Mae guidelines in evaluating mortgage applicants.

Fannie Mae is described as a quasi-government agency because of its special relationship with the federal government. It's also a shareholder-owned corporation whose shares trade on the New York Stock Exchange (NYSE).