FANNIEMMAE.COM and www fannie mae
FNMA (Fannie Mae) official website.

About FannieMay.com
 

The Federal National Mortgage Association (FNMA) (NYSE: FNM), commonly known as Fannie Mae, is a government sponsored enterprise (GSE) of the United States. It is a stockholder-owned corporation authorized to make loans and loan guarantees. The fallout from troubles at Fannie Mae and Freddie Mac widened in August when some of their securities were downgraded, stinging the banks and insurers that hold them.

Fannie May is the leading market-maker in the U.S. secondary mortgage market, which helps to replenish the supply money for mortgages and enables money to be available for housing purchases.

SOME OF THE nation's top economists figure the government's response to Fannie Mae and Freddie Mac has come to a critical turning point: They expect Treasury will be forced to inject funds into the two firms, but they're not sure whether pulling the trigger will be enough to bolster the sagging economy.

The woes of the two mortgage-lending giants were the talk of the Federal Reserve Bank of Kansas City's annual mountainside conference here in Jackson Hole, Wyo. When the central bankers, academics and Wall Street economists met a year ago, the housing-market troubles had just begun to deepen global-credit problems.

As of 2008, Fannie Mae and the Federal Home Loan Mortgage Corporation (Freddie Mac) own or guarantee about half of the U.S.'s $12 trillion mortgage market. As a result, the corporations were affected particularly hard by the economic downturn in late 2007 and early 2008.

Although they only guarantee or own only half of the mortgage market, because the subprime crisis has caused almost all other lending sources to pull out of the market, they are responsible for more then 80% of new mortgages being made in 2008.

The name "Fannie Mae" is a creative pronunciation of the company's name that has been adopted officially for ease of identification. It is more than an informal nickname; FNMA refers to itself by this name.

In a traditional loan, a bank or another lender might lend money to an individual to buy a home out of the funds deposited with that bank or lender. The bank or lender would charge interest and accept monthly payments on the loan until the loan was repaid after 30 years. There are two problems for the bank with this model however. The first is that the customer may want a fixed rate of interest, but the bank has to pay a variable rate of interest to it's depositors as the interest rates in the economy rise and fall. This exposes the bank to the risk that it might need to pay more to it's depositors then it receives from the loan. The second problem is that the bank may run out of funds to lend to it's customers (ie. there is more customer demand for loans then customer deposits in the bank).

A solution to these problems is for the bank to sell bonds to outside investors based on the mortgages it has made. For a simplified example, a bank can sell one hundred $1000.00 bonds that pay 7% interest based on a mortgage loan for $100,000.00 that it made where it charged their customer 7%. The bond purchaser's money would therefor be recouped to the bank and the bond owners would effectively be lending the funds to the homeowner. The homeowner wouldn't know this would occurred because they would still be receiving the bill from the bank who would pass the payments on to the bond owners (this is known as servicing the loan). Doing this solves both problems simultaneously, as the investor would be seeking a sure fixed interest rate to invest their money and the bank would recoup it's funds to lend more money. Under this model however, the investor is at risk if the borrower doesn't pay their monthly payment and if the loan is not repaid either from the borrowers payment or from the sale of the house.

About: Fannie Mae Mortgages | FannieMae.com | www Fannie Mae | Fannie Mae.gov | Fannie May Loans | Fanny May