FNMA

FNMA
ajay_suresh · CC BY 2.0 · source
Name	Federal National Mortgage Association
Type	Government-sponsored enterprise
Founded	1938
Founder	Franklin D. Roosevelt
Headquarters	Hyattsville, Maryland
Area served	United States
Key people	Benjamin S. Bernanke; Mel Watt; Donald L. H{"o}fft
Products	Mortgage finance, mortgage-backed securities
Num employees	7,000 (approx.)

FNMA

The Federal National Mortgage Association is a United States secondary mortgage market institution created to enhance liquidity for residential Federal Housing Administration and United States Housing Authority loans, later extending to conventional mortgage lending. Established during the New Deal era, it operates alongside institutions like the Federal Home Loan Mortgage Corporation and interacts with Department of the Treasury, Federal Reserve System, and private banks. Its activities have influenced markets such as the securitization industry, affected policy debates like responses to the 2008 financial crisis, and intersect with figures including Henry Morgenthau Jr. and Ben Bernanke.

History

The organization emerged from reforms enacted during the Great Depression and the Housing Act of 1934 under Franklin D. Roosevelt to stabilize housing finance and support recovery after the Dust Bowl and banking failures. Early leadership included officials connected to the Home Owners' Loan Corporation and initiatives tied to the New Deal Cabinet. Post-World War II expansion paralleled suburbanization trends exemplified by developments such as Levittown, and it adapted to shifts driven by the GI Bill and growth in Fannie Mae Bond markets. In the late 20th century, legislative changes like the Secondary Mortgage Market Enhancement Act of 1984 and deregulatory trends influenced its transformation; events culminating in the 2008 financial crisis led to conservatorship overseen by the Federal Housing Finance Agency with Department of the Treasury support. Subsequent leadership transitions involved figures who had worked with entities such as Federal Reserve Bank of New York, Goldman Sachs, and Morgan Stanley.

Structure and Governance

The institution's governance historically included a board of directors and executive officers who coordinated with federal overseers including the Department of the Treasury and regulators such as the Federal Housing Finance Agency. Its charter and statutory obligations have been shaped by acts of United States Congress and oversight from presidents including Barack Obama and George W. Bush, and by congressional committees like the United States House Committee on Financial Services. Interaction with counterpart organizations—Federal Home Loan Banks, Ginnie Mae, and private issuers such as JP Morgan Chase, Bank of America, and Wells Fargo—has influenced its organizational decision-making. Leadership appointments often drew from careers at institutions like the Securities and Exchange Commission, Federal Reserve Board, and major investment banks such as Citigroup.

Functions and Operations

Primary functions include purchasing qualifying single-family mortgage loans from lenders, pooling loans into securities, and guaranteeing timely payment of principal and interest on certain mortgage-backed instruments. It provides liquidity to lenders including regional banks like SunTrust Banks and community banks, enabling origination to consumers under programs influenced by statutes such as the Truth in Lending Act. Operational activities encompass risk management practices interacting with capital markets participants including BlackRock, PIMCO, and asset managers that trade agency securities. Its guarantee programs interface with insurers such as AIG during periods of market stress and work alongside settlement infrastructure like the Depository Trust & Clearing Corporation.

Mortgage-Backed Securities and Secondary Market Role

The entity was a pioneer in large-scale issuance of agency mortgage-backed securities, contributing to the growth of securitization practices used widely by firms including Fannie Mae contemporaries and private-label issuers like Countrywide Financial. Its securities are traded in markets alongside instruments from U.S. Treasury and corporate debt offered by firms such as General Electric Capital Corporation. The secondary market role includes guaranteeing payment on securities that finance mortgages originated by lenders from rural areas served by institutions like Farm Credit System to metropolitan lenders in cities such as New York City and Los Angeles. Market operations have been affected by events tied to Lehman Brothers collapse and central bank interventions by the Federal Reserve Bank of New York during crises.

Financial Performance and Regulation

Financial performance metrics—capital, earnings, credit losses—are subject to scrutiny by regulators including the Federal Housing Finance Agency and committees in the United States Senate Committee on Banking, Housing, and Urban Affairs. Accounting standards from boards such as the Financial Accounting Standards Board and auditing relationships with firms like PricewaterhouseCoopers affect reported results. Emergency measures during systemic stress involved backstops from the Department of the Treasury and policy tools implemented by Ben Bernanke and the Federal Reserve Board. Legislative proposals and reforms considered by lawmakers including Elizabeth Warren and Timothy Geithner have sought to change capital requirements and resolution mechanisms.

Controversies and Criticism

Critiques have focused on moral hazard, taxpayer exposure, and relationships with Wall Street firms such as Goldman Sachs and Morgan Stanley; notable controversies intersected with the 2008 financial crisis, the conservatorship overseen by the Federal Housing Finance Agency, and litigation involving investors like BlackRock and pension funds. Debates over affordable housing mandates linked to policy discussions in hearings of the House Financial Services Committee have involved advocates associated with groups like National Low Income Housing Coalition and mortgage lenders such as Countrywide Financial. Allegations of regulatory capture, risk underpricing, and insufficient capital prompted proposals from reformers including Paul Ryan and Sherrod Brown; litigation and settlement actions have involved law firms such as Skadden, Arps, Slate, Meagher & Flom.

Category:United States housing finance