Fannie Mae
The Federal National Mortgage Association, a government-sponsored enterprise that purchases mortgages from lenders and either holds them in portfolio or packages them into mortgage-backed securities for sale to investors. Fannie Mae increases liquidity in the mortgage market by providing lenders with capital to make new loans to homebuyers.
Example
“The bank sold the mortgage to Fannie Mae within 30 days of closing to free up capital for new loans.”
Memory Tip
Fannie Mae sounds like a friendly aunt who helps families get mortgages by buying loans from banks.
Why It Matters
Fannie Mae's activities help keep mortgage interest rates lower and credit more available for homebuyers by providing a secondary market for loans. Many borrowers benefit from Fannie Mae loan programs even if they've never heard of the organization.
Common Misconception
Many people think Fannie Mae is a government agency that directly lends money to homebuyers, but it actually purchases loans from banks and credit unions rather than lending directly to consumers.
In Practice
A homebuyer gets a mortgage from their local bank, but within 30 days, the bank sells that mortgage to Fannie Mae while continuing to service the loan and collect monthly payments on Fannie Mae's behalf.
Etymology
Nicknamed 'Fannie Mae' as a folksy pronunciation of its acronym FNMA (Federal National Mortgage Association), created in 1938 during the New Deal.
Common Misspellings
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