What Is Fannie Mae?
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Aside from being established separately, one major difference is that Fannie Mae tends to purchase loans from larger lenders, while Freddie Mac purchases mortgages from smaller companies. Together they own more than half of America’s .
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Bloomberg Creative Photos/Getty Images November 08, 2022 Troy Segal is Bankrate's Senior Homeownership Editor, focusing on everything from upkeep and maintenance to building equity and enhancing value. Bankrate logoThe Bankrate promise
At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict editorial integrity, this post may contain references to products from our partners. Here's an explanation for how we make money. Bankrate logoThe Bankrate promise
Founded in 1976, Bankrate has a long track record of helping people make smart financial choices. We’ve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in which actions to take next. Bankrate follows a strict , so you can trust that we’re putting your interests first. All of our content is authored by and edited by , who ensure everything we publish is objective, accurate and trustworthy. Buying or selling a home is one of the biggest financial decisions an individual will ever make. Our real estate reporters and editors focus on educating consumers about this life-changing transaction and how to navigate the complex and ever-changing housing market. From finding an agent to closing and beyond, our goal is to help you feel confident that you're making the best, and smartest, real estate deal possible. Bankrate logoEditorial integrity
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You have money questions. Bankrate has answers. Our experts have been helping you master your money for over four decades. We continually strive to provide consumers with the expert advice and tools needed to succeed throughout life’s financial journey. Bankrate follows a strict , so you can trust that our content is honest and accurate. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The content created by our editorial staff is objective, factual, and not influenced by our advertisers. We’re transparent about how we are able to bring quality content, competitive rates, and useful tools to you by explaining how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and, services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range can also impact how and where products appear on this site. While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service. The Federal National Mortgage Association (FNMA), colloquially known as Fannie Mae, is a Congressionally-chartered agency that acts as a major player in the mortgage industry. Fannie Mae does not originate or offer mortgages directly to borrowers, but instead purchases them from lenders who do, in effect guaranteeing a market for the mortgages. By investing in them this way, it offers liquidity, stability and an ongoing “flow of capital into the U.S. housing market,” as per the , as well as the banks and companies that make mortgage loans. Along with buying loans from banks and mortgage companies, Fannie Mae offers a variety of loan products to financial institutions and education programs and services to consumers, helping to ensure homeownership for low- and middle-income Americans specifically.What does Fannie Mae do
Created during the Great Depression, Fannie Mae is structured as a shareholder-owned company, though it under the control of the . It is what is known as a (GSE): a private agency or corporation with a federal charter to provide financial services to the public. In Fannie’s case, those financial services revolve around home loans. Fannie Mae performs a variety of functions to back the mortgage industry and, by extension, the housing market. It offers ready access to funds on reasonable terms to the thousands of banks, credit unions and mortgage companies that finance home purchases. With to “facilitate equitable and sustainable access to homeownership and quality affordable rental housing across America,” Fannie also indirectly aids individuals.Buys and backs mortgages
Fannie Mae buys home loans and mortgages in the (where lenders sell the loans and mortgages they’ve originated). This in turn frees up the lender’s capital so that it can extend new loans to more borrowers. Most mortgage originators do actually end up selling their loans, but since they often continue servicing them, the mortgage-holder never knows it. In fact, Fannie Mae, and its sister GSE Freddie Mac (officially the Federal Home Loan Mortgage Corporation) are the largest mortgage market-makers in the U.S. In addition to purchasing mortgage loans on the secondary market, both Fannie and Freddie either hold the loans individually or package them into to be sold to investors. Either way, the burden of the debit is acquired by Fannie and pressure is thus moved away from private lending institutions. Fannie Mae, like Freddie Mac, has a focus of keeping the mortgage market fluid and well-regulated, keeping credit and the flow of funds operating smoothly.Operates HomePath
HomePath is a program Fannie Mae uses to help homeowners facing . Through HomePath, Fannie Mae works with individuals, helping them to understand alternatives they may have. If a foreclosure does occur, properties are purchased back by Fannie Mae, making them a real-estate owned (REO) home. Prospective buyers may then purchase foreclosed and with a down-payment as low as 3 percent. Some HomePath properties have been seized. Others, though, are owner surrenders – a property owner would rather walk away from their house than bear the brunt of a foreclosure on their credit. Either way, buyers must meet to be eligible to purchase through this program. Buyers must be: Eligible to purchase the property on a basis Willing and ready to close the sale quickly, often within 30 days Ready to purchase the property , without repairs made before closing Represented by a who uses a Fannie Mae-generated sales contract for a loan at the time of their offer (if the purchase is being made with financing) In many cases, HomePath properties are sold as-is. In others, however, Fannie Mae may opt to invest in or repair the property, in the interest of maintaining neighborhood home values. Buyers with limited options may find this program advantageous, and real estate investors may find available properties using the program.Runs counseling networks
Fannie Mae directly aids consumers by providing a variety of counseling services. They can be reached through its site. The site also provides consumer-friendly information about homeownership financials, including , forbearance and payment deferral options, mortgage modification programs and refinancing opportunities.Mortgage Help Network
The Fannie Mae Mortgage Help Network is free for homeowners whose mortgages have been purchased by Fannie Mae and who have been impacted by a national disaster or other kind of crisis. Participants in this program can receive free HUD-approved nonprofit credit counseling to learn more about what their options are during times of financial hardship.Disaster Response Network
A part of the larger Mortgage Help Network, this program helps to support homeowners whose property has been impacted by a or other significant crisis, such as the COVID-19 pandemic. This support is available in multiple languages, and for up to 18 months in duration.Asset Management Network
assists consumers much like the Disaster Response Network, but deals with other circumstances, such as delinquent payments due to an illness, job loss, or death.Fannie Mae loan products
Like other government agencies, such as the Federal Home Administration (FHA), Fannie Mae operates through private lenders to offer financing options. The terms are more generous than those of conventional mortgage lenders, who typically require 10 or 20 percent of the property’s value as a down payment.HomeReady
is a loan program geared towards low-income aspiring homeowners — mainly first-timers, though experienced types can apply as well (as long as they don’t have an outstanding mortgage). While HomeReady, like the FHA, does not lend directly to consumers — it’s offered through Fannie-approved lenders — participation in the program can help borrowers who cannot qualify for conventional loans; in fact, it even has lower barriers than an FHA loan (as little as ). For first-time homeowners, requirements do include the completion of a homeowner education program before approval.97% LTV Program
This program, aka “Conventional 97”, is available to first-time borrowers and consumers whose loans have already been purchased by Fannie Mae. Similar to HomeReady, buyers can pay as little as , creating a 97% (LTV) opportunity. These loans are available to those making somewhat more than HomeReady applicants.REfiNow
extends home refinances to borrowers who have substantial equity in their homes, and it is geared toward helping lower monthly housing costs. REfiNow requires borrowers to make at or less than 100 percent of the area median income, and allows for up to a 65% . As of April 2022, there is no longer a minimum credit score for borrowers to qualify for this program.HFA Preferred
is a low-down-payment conventional mortgage. Together with lenders, Fannie Mae works with Housing Finance Agencies (HSAs) to issue these loans. Similar to , HFA loans are offered through Fannie Mae and Freddie Mac in partnership with state-level housing agencies; though they offer many of the same perks as FHA loans, they are not limited to first-time buyers.History of Fannie Mae
Fannie Mae was established by the Congressional in 1938. In the wake of the Great Depression, nearly a quarter of U.S. homeowners lost their properties to foreclosure – and part of the government response was chartering Fannie Mae to help stabilize the housing market. Prior to Fannie Mae, homeownership was within reach only for the privileged few: Mortgages were short-term and financed at best half of a home’s price. The establishment of this new agency brought forward a new type of loan product: the long-term (30-year), , which increased accessibility to homeownership for middle- and lower-income Americans. With more affordable monthly payments and lower down-payment thresholds, owning a home became part of the American Dream. In 2008, Fannie Mae was placed under government along with Freddie Mac, as a part of that year’s legislation. The two companies had grown to a point of mortgage industry monopoly, and during the subprime mortgage crisis of 2006-7, their loan portfolios dropped drastically in value. To avoid their bankruptcy — and a collapse of the entire financial system — the U.S. government took control of both Fannie Mae and Freddie Mac. Both companies remain under conservatorship in an effort to repair their balance sheets. As a part of this oversight, Fannie Mae is mandated to report its performance to the government, and is issued a scorecard each year ranking its financial health. The conservatorship is indefinite; according to one from New York University’s Furman Center Blog, The Stoop, it is likely to end no earlier than 2026.Frequently asked questions
What s the difference between Fannie Mae and Freddie Mac
(also known as the FHLMC) are two separate entities. While both were established as government-sponsored enterprises (GSEs) and purchase mortgages, and both are under the conservatorship of the same government agency for now, Freddie Mac was created following an act of Congress in 1970, while Fannie is much older — dating from the Depression years.Aside from being established separately, one major difference is that Fannie Mae tends to purchase loans from larger lenders, while Freddie Mac purchases mortgages from smaller companies. Together they own more than half of America’s .