Understanding Fannie Mae
The Federal National Mortgage Association, abbreviated FMNA, and commonly called “Fannie Mae” was established in 1938 by the US Congress as a Government Sponsored Enterprise. In 1968, the government converted Fannie Mae into a private shareholder-owned corporation.
Fannie Mae is responsible for maintaining a secondary market in home mortgages, by buying and pooling conforming loans from original lenders.
Fannie Mae buys loans, either for cash or in exchange for mortgage-backed securities that carry Fannie Mae’s guarantee of timely payment of interest and principal.
By purchasing the mortgages, Fannie Mae provide banks and other financial institutions with fresh money to make new loans.
In order for Fannie Mae to provide its guarantee to mortgage-backed securities it issues, it sets the guidelines for the loans that it will accept for purchase, called “conforming” loans. Mortgages that don’t follow the guidelines are called “non-conforming”.
Need more information? Call Joe Elizondo of Northeast Financial at 323-256-7833 or email Joe at neast-financial @ sbcglobal.net.