Fannie Mae

Fannie Mae (Federal National Mortgage Association) was established in 1938 by the US Congress as a government institute that would be maintaining a leading market in home mortgages. It is the backbone, the infrastructure of home mortgages and any loss incurred by this company causes the entire stock market to suffer.

Fannie Mae ensures that mortgages follow certain guidelines and that the set out rules, regulations, criteria and limits are met accordingly. In this way both lenders and borrowers get an advantage.

Lenders can have the ability to provide long term mortgages, whereas borrowers can have low mortgage interest rates.  In here comes Jumbo loans which are loans that exceed the criteria set out by Fannie Mae.

Recently however, Fannie Mae has been privatized and has become a profit gaining company that has started to pose high risks to borrowers. Fannie Mae mainly buys and collects conforming loans, which are loans that follow the Government Sponsored Enterprise (GSE) structure.

Fannie Mae is owned by shareholders and serves as a quasi-governmental agency. In simple language the company makes sure that Americans may have the cash to buy homes by getting mortgages, which is available through lenders. Fannie doesn’t deal with borrowers, rather it deals with lenders by letting in cash in the secondary mortgage market.

Banks that tie themselves to Fannie Mae have more advantages as the company changes the loans that banks have into cash and that cash is provided to borrowers. What happens next is that borrowers keep paying the loan money and the bank passes the funds to Fannie Mae. In this way multiple banks submit their funds to Fannie and the company in turn makes multiple loans from the principal base. Because of this banks have the ability to provide Americans with the constant money needed for the mortgage and that is the reason why 70% + people own a mortgage home.

Not only does Fannie Mae ties itself to mortgage loans, it is partnered with all the insurance industry giants, pension funds and many other such investors. It makes more money when it packs up all mortgage loans and provide it in a bundle to sell to the investors. All the principal and timely payments are then provided to the investors. If in case this guarantee is not fulfilled, Fannie will have to provide the investors in whole out of people’s taxes. The company has the backing of the government and thus no tax is imposed on it, making it the most powerful controller of not only US finance but also world over.

Recently the companies have nearly crashed out because of its constant risk taking nature and also because of the government’s negligence. This is what has caused the entire world to go into a recession phase. America’s economy went through a  disaster that dropped its dollar rating throughout the world, all because of constant borrowing, loan paying, and ofcourse Fannie Mae!

People who liked this Post also read

  • Conforming Mortgages
    Lender’s conforming mortgage loan is the loans first purchased and then invested by Freddie Mac and Fannie Mae, the two private lender’s organizations. They are granted for fixed time period, to qualify for this one has to possess good credit scores. Brok...
  • Non Conforming Mortgage Loan
    The non confirming mortgage loans are under direct control of FNMA and FHLMA. To approve a deal from private investors one has to contact mortgage brokers. The interest rates of non confirming mortgage loans are very high and the only key to lower them is...
  • 30 Year Home Loan
    Planning to build a home is one of the most difficult stages in ones life. It requires a lot of effort and dedication. Home Loans are available to help the Purchaser and facilitate the income bracket. Have a look at the 30 Year Home Loan Rate Plan. This r...
  • Commercial Mortgage Loan Rates
    Now a days as commercial mortgage rates are very low and it’s an opportunity for those people who wants to start their new business. It is not an easy to get loan at lowest commercial mortgage rates against commercial property for this purpose one needs a...
  • 2nd Mortgage and Homeowners
    Second mortgage loans are the last option to get rid of lenders. In simple words the first mortgager get his money from second mortgager and second mortgager makes an agreement with the borrower. There are many pre requisites and requirements which a borr...

is an experienced journalist.

Leave a Reply

CommentLuv badge

© 2011 Loan Mortgage Credit!. All rights reserved.