Fannie Mae: Who is She and How did She Get into Trouble?
Mortgage loans are getting harder and harder to get. The reins have just tightened again with the government takeover of the secondary loan market known as Fannie Mae. The failure yesterday, September 29, to pass the massive bailout legislation only adds to this troubling situation in the home lending sector.
Partially Reprinted from Wikipedia
The Federal National Mortgage Association (FNMA) , commonly known as Fannie Mae, is a publicly traded government sponsored enterprise (GSE). It is a stockholder-owned corporation authorized to make loans and loan guarantees.
Fannie Mae is the leading participant in the U.S. secondary mortgage market, which serves to provide liquidity to the primary mortgage market to ensure that mortgage companies, savings and loans, commercial banks, credit unions, and state and local housing finance agencies have enough funds to lend to home buyers.
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 particularly affected by the housing market downturn and credit crunch that began in 2007.
On September 7, 2008, James Lockhart, director of the Federal Housing Finance Agency (FHFA), announced that Fannie Mae and Freddie Mac were being placed into conservatorship of the FHFA. The action is one of the most sweeping government interventions in private financial markets in decades. However, it is dwarfed by the impending $700 billion bail-out.
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