Many people believe Fannie Mae mortgages are owned by the federal government. However, this enterprise is no longer owned by the government and is a now a government sponsored enterprise (GSE); meaning it is privately owned, but publicly chartered.
Fannie Mae mortgages make up almost half of the home loans in the U.S. market. Combined with real estate loans owned by Freddie Mac, these two GSE's have amassed a mortgage portfolio that exceeds $5 trillion.
This entity does not originate mortgage loans. Instead they purchase mortgages from banks and bundle them in packages to sell to investors. The Federal Reserve Board places limitations on how much credit banks can extend for real estate mortgages. To keep credit lines open, Fannie Mae purchases loans directly from banks. Essentially, this organization is the primary entity that keeps credit lines open so banks can engage in additional lending.
Fannie Mae was originated in 1938 under the leadership of President Franklin Roosevelt. Its intended function was to offer affordable housing opportunities to every American that wanted to own a house.
The enterprise was owned by the government until 1968 when it shifted to a private shareholder-owned enterprise. For the next 39 years, the company prospered and offered additional programs to help Americans achieve their dream of homeownership.
In 2007, Fannie Mae was nearly decimated by the abundance of foreclosures that erupted from subprime lending practices. In September 2008, the Federal Housing Finance Agency placed Fannie Mae and Freddie Mac into conservatorship and infused billions of dollars from taxpayers to keep the entities afloat.
While bank bailouts have been an explosive topic that enrages American taxpayers, the truth of the matter is if these GSEs hadn't been placed into conservatorship the U.S. real estate market would have completely fallen apart.
The controversy that encircles the government bailout not only involves using taxpayer money, but also the fact that the government agreed to provide unlimited funding to ensure neither entity failed again.
There is no doubt that many people view Fannie Mae in a negative light. However, this GSE has implemented several positive changes since the bailout. In addition to establishing programs to offer assistance to homeowners facing foreclosure, Homepath Mortgage was setup to help people buy bank foreclosures at reduced costs.
Homepath properties are comprised of residential houses that were repossessed via foreclosure or returned to banks using deed in lieu of foreclosure. Homepath Mortgage offers special incentives to buyers that purchase distressed properties including low down payment requirements and reduced interest rates.
Fannie Mae also set up the website of KnowYourOptions.com to provide information and resources to homeowners faced with foreclosure. The entity established mortgage help centers in various locations across the nation where homeowners can obtain complimentary housing counseling. Homeowners that don't reside near a mortgage help center can acquire counseling over the phone.
Available programs include: loan modification, mortgage refinance, deferred payments, real estate forbearance, principal reduction, and foreclosure alternatives of deed in lieu, real estate short sales, and deed for lease; a program that lets homeowners assign the deed to their home back to the bank and enter into a leasing agreement so they don't have to move.
One certainty is that Fannie Mae isn't likely to be dissolved in the near future. Homeowners that need help with home loans ought to consider making use of Fannie Mae mortgage programs that their tax dollars helped pay for.
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