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Fannie Mae is a government-sponsored enterprise, as are Ginnie Mae and Freddie Mac. The Federal National Mortgage Association (FNMA or Fannie Mae), Government National Mortgage Association (GNMA or Ginnie Mae) and Federal Home Loan Mortgage Corporation (FHLMC or Freddie Mac) are all “secondary market lenders.” Fannie and Freddie subsidize the real estate mortgage market by buying mortgage loans originated by banks and other lending institutions. They also package mortgages and sell them to insurance companies, pension funds, and other financial institutions as mortgage-backed securities. |
Fannie Mae was created by Congress in 1938 as a government agency to buy mortgages from lenders, creating a secondary market for loans insured by the FHA. Congress had created the Federal Housing Administration in 1934 to prop up real estate by providing governmental mortgage insurance for lenders. The federal government has also created the Government National Mortgage Association, GNMA or Ginnie Mae, to provide subsidized loans. A bank can originate a below-market loan to a low-income borrower, and then sell it to Ginnie Mae at full market value; the government pays the difference.
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