Definition
The Federal National Mortgage Association commonly referred to as Fannie Mae, or FNMA, was established by the Federal government in 1938 to increase the amount of mortgage money available to the public. This was to be accomplished through the creation of a secondary market for mortgages.
Explanation
Fannie Mae began to expand its role in 1968 through privatization. As a privately held company, Fannie Mae was able to repurchase additional mortgages beyond FHA insured loans, thereby increasing its reach throughout America.
By repurchasing Federal Housing Administration (FHA) insured mortgages, Fannie Mae is able to replenish the supply of money available to lend homeowners. Fannie Mae still operates under a congressional charter that charges Fannie Mae with increasing low and middle income Americans' opportunities for homeownership.
Fannie Mae has aligned its organization to support three objectives:
Mortgage Liquidity: repurchasing of home loans from lenders, so additional mortgages can be written.
Reduce Foreclosures: providing assistance to existing homeowners experiencing financial distress.
Sustainable Lending: ensuring prospective homeowners are securing home loans they can truly afford.