Fannie Mae and the Home of Your Dreams
Ever wonder about owning your own home? If you're like millions
of Americans, the dream is a real possibility. Thanks in part to
the government, and their foresight in establishing the Fannie
Mae Corporation. Until recently, Fannie Mae was a part of the US
Government, and was overseen by the Housing and Urban
Development branch of that government. Now, however, Fannie Mae
is a privately held, stock ownership company that promotes the
growth of the housing industry by making it possible for many
low-to-middle income Americans to own homes.
How did all this come about, and what does it mean to the
mortgage industry? Let's take just a moment to explore Fannie
Mae's history, mission, and place in the current mortgage
industry.
In 1938, Fannie Mae was established by the US Government to
promote the growth of home ownership by providing a secondary
mortgage market. What is a secondary mortgage market? Well, the
secondary mortgage market exists in the buying and selling of a
mortgage from one lender to another. The bank, or Mortgage
Company that provided you with your loan, can turn around and
seek to sell your mortgage to a company such as Fannie Mae. This
frees up their cash to make another mortgage loan. And the cycle
of growth is expanded and sustained in this manner. The idea and
concept worked, and today, Fannie Mae has helped millions of
Americans achieve the dream of home ownership.
In 1968, just thirty years later, Fannie Mae became a private
company operating with private capital. She had outgrown her
need for federal funding and supervision. The housing industry
has continued to grow, and currently the entire mortgage market
is experiencing phenomenal success.
Thanks also to the available technology, Fannie Mae helps
today's lenders approve customers in less than 24 hours. Many
lenders use the automated system provided by Fannie Mae to seek
and get approval for borrowers much faster than anything
available, even 10 years ago. Fannie Mae Corporation has done a
fantastic job of promoting the growth of housing among the
low-to-middle income Americans for the last 10 years, and thanks
to those efforts, more American own homes now, than in any other
period in history. That's quite an accomplishment, by a company
that never directly lends money to the consumer.
Fannie Mae deals only in the secondary mortgage market, this way
Fannie Mae Corporation can ensure that money for mortgages is
available throughout the 50 states and that as many homeowners
as possible can take advantage of home ownership.
How does Fannie Mae continue to fund the mortgages that she
buys? Through the issuance of mortgage backed securities. These
securities known as MBS are issued to investors. When Fannie Mae
issues the MBS, she is guaranteeing the investors a return on
their investment, and at the same time, providing a source of
funding for issuing further mortgages. This provides the
nation's lenders with a steady stream of cash to continue to
make mortgages available to the consumer.
How does all this relate to the home of your dreams? Well, stop
just a moment to connect all the dots. Fannie Mae buys mortgages
from your local lender. The lender receives the proceeds from
that purchase, and can then offer a new mortgage to you. It's a
steady and continual circle of growth. Why? Well, Fannie Mae
isn't the only lender in the secondary market. Insurance
companies, pension funds, securities dealers, and other
financial institutions buy mortgages on the secondary market.
Who invests in these insurance companies, pension funds and
securities dealers? Where do they get their money? From
taxpayers just like you. Mortgage holders just like you. Now can
you see how Fannie Mae and other mortgage lenders in the
secondary market, work to foster home ownership and community
growth, all in one process?
The primary focus for Fannie Mae, operating under a government
directive, is to provide the maximum amount of help to lenders
in making mortgage loans to the low, to middle, to moderate
income families across America. Fannie Mae is also involved in a
nationwide effort to join with lenders and community partners to
create even more home ownership possibilities.