Who is Fannie Mae
Fannie Mae is a private, shareholder-owned company that works to make sure mortgage money is available for people in communities all across America. We do not lend money directly to home buyers. Instead, we work with lenders to make sure they don't run out of mortgage funds, so more people can achieve the dream of homeownership.
Fannie Mae was created by Congress in 1938 to bolster the housing industry during the Depression. At that time, Fannie Mae was part of the Federal Housing Administration (FHA) and authorized to buy only FHA-insured loans to replenish lenders' supply of money.
In 1968, Fannie Mae became a private company operating with private capital on a self-sustaining basis. Its role was expanded to buy mortgages beyond traditional government loan limits, reaching out to a broader cross-section of Americans.
Today, Fannie Mae operates under a congressional charter that directs us to channel our efforts into increasing the availability and affordability of homeownership for low-, moderate-, and middle-income Americans. Yet Fannie Mae receives no government funding or backing, and we are one of the nation's largest taxpayers as well as one of the most consistently profitable corporations in America.
Fannie Mae stock (FNM) today is actively traded on the New York and other exchanges and is part of the Standard and Poor's 500 Composite Stock Price Index.
We are the country's third largest corporation, in terms of assets, and the nation's largest provider of funds for home mortgages. With a book of business that currently exceeds 12 million mortgages, we are one of the largest financial services corporations in the world. And with approximately 3,800 dedicated employees, we are also one of the world's most productive corporations.
We are at the heart of the U.S. housing industry -- an enormous industry that is $4.5 trillion strong. And although we don't lend money directly to home buyers, we ensure that mortgage funds are consistently available and affordable by buying mortgages from a variety of institutions that do lend money directly to home buyers.
The lenders with which we do
business are part of
the primary mortgage market -- the place where mortgages are originated and
funds are loaned
directly to borrowers. Primary market lenders include mortgage companies,
savings and loans, commercial banks, credit unions, and state and local housing
finance agencies.
Lenders sell mortgages into
what's called the secondary market -- the place where mortgages are bought
and sold by various investors. Secondary market investors include Fannie Mae,
various pension funds, insurance companies, securities dealers, and other
financial institutions.
Once a mortgage is originated, lenders have a choice. They can either hold the mortgage in their own portfolio or they can sell the mortgages to secondary market investors, such as Fannie Mae. When lenders sell their mortgages, they replenish their funds so they can turn around and lend more money to home buyers.
Lenders can sell us mortgages
that comply with our guidelines and loan limits. Currently, we buy mortgages up
to a loan limit of $275,000. This is in keeping with Fannie Mae's mission to
help more low-, moderate-, and middle-income people buy homes. Our loan limits
are adjusted each year, in response to changes in housing affordability
nationwide.
Fannie Mae operates exclusively in the secondary mortgage market, where we help to ensure that money for mortgages is available to home buyers in every state across the country, every day. And we do this in two ways. First, we pay cash for mortgages that we buy from lenders and hold those mortgages in our portfolio. The lenders, in turn can use that money to make more mortgages for more home buyers. Second we issue what are known as Mortgage-Backed Securities (MBS) in exchange for pools of mortgages from lenders. These MBS provide the lenders with a more liquid asset to hold or sell. Fannie Mae MBS are highly liquid investments and are traded on Wall Street through securities dealers.
In order to fund the mortgages we buy, we issue debt securities to investors. A significant part of our earnings is derived from the difference between the yield on those mortgages and the cost we endured to buy them. When we issue MBS, we guarantee that investors will receive timely principal and interest payments regardless of what happens to the underlying mortgages. In return for the guaranty, we earn a fee. These fees are another source of Fannie Mae's income.
As the secondary market leader, Fannie Mae's critical role in providing a steady stream of mortgage funds to lenders across the country is complemented by new technologies that make the process of buying a home quicker, easier and less expensive. We have developed automated systems that our lenders are using nationwide -- which allows many of their home-buying customers to get approved for a mortgage loan more quickly and affordably than ever before.
|
