Federal National Mortgage Association (Fannie Mae)

Federal National Mortgage Association (Fannie Mae)
Name	Federal National Mortgage Association
Trade name	Fannie Mae
Type	Government-sponsored enterprise
Founded	1938 (as part of New Deal); reorganized 1968
Headquarters	Washington, D.C.
Key people	Kenneth D. Lewis (former CEO), Daniel Mudd (former CEO), Timothy Howard (former CEO)
Industry	Mortgage finance
Products	Mortgage-backed securities, secondary mortgage market

Federal National Mortgage Association (Fannie Mae) The Federal National Mortgage Association (commonly known by its trade name) is a United States hybrid corporate entity created to expand the secondary mortgage market by securitizing home loans. It operates alongside institutions such as Freddie Mac, Ginnie Mae, and private-label securitizers to influence residential credit availability, interacting with actors including the Federal Reserve System, U.S. Department of the Treasury, and major banks like JPMorgan Chase, Bank of America, and Wells Fargo. Its actions have intersected with events and laws such as the Great Depression, the New Deal, the Housing and Urban Development Act of 1968, and the Financial crisis of 2007–2008.

History

Fannie Mae was created following policy responses to the Great Depression and programs initiated under Franklin D. Roosevelt's New Deal, initially as part of the Federal Housing Administration's ecosystem and later formalized by the National Housing Act of 1934 and subsequent legislation. In 1968, during the Lyndon B. Johnson administration and amid debates in Congress with figures like Senator Robert F. Kennedy and legislative action by the United States Congress, Fannie Mae was chartered as a shareholder-owned company separate from the Department of Housing and Urban Development. The organization expanded through interactions with insurers and lenders such as Countrywide Financial, Bank of America, and investment banks including Goldman Sachs and Morgan Stanley, becoming central to the rise of mortgage-backed securities markets epitomized by instruments traded by firms like Lehman Brothers and Bear Stearns. Its role was scrutinized during the Financial crisis of 2007–2008, after which Fannie Mae entered conservatorship overseen by the Federal Housing Finance Agency with intervention from the U.S. Department of the Treasury and officials like Henry Paulson.

Mission and Functions

Fannie Mae’s chartered mission ties to objectives articulated in statutes and policy debates involving entities such as Congressional Budget Office, Government Accountability Office, and the U.S. Department of Housing and Urban Development. It seeks to provide liquidity, stability, and affordability in residential mortgage markets by purchasing loans from originators like Quicken Loans, Citigroup, and Wells Fargo, pooling them, and issuing mortgage-backed securities that attract investors including Pension Benefit Guaranty Corporation, BlackRock, and Vanguard Group. Its functions intersect with regulatory and policy frameworks from Dodd–Frank Wall Street Reform and Consumer Protection Act, supervision by the Federal Housing Finance Agency, and interactions with rating agencies including Moody's Investors Service, Standard & Poor's, and Fitch Ratings.

Organizational Structure and Governance

Fannie Mae’s corporate governance has involved boards and executives subject to oversight by regulators such as the Federal Housing Finance Agency and legal scrutiny in courts like the United States Court of Appeals for the District of Columbia Circuit. Its boardroom history includes executives and directors with ties to institutions such as Goldman Sachs, Citigroup, MBNA, and academic affiliates from Harvard University, University of Pennsylvania, and Georgetown University. Governance reforms and leadership changes have been influenced by congressional hearings led by committees like the House Financial Services Committee and the Senate Banking Committee, and by external actors including accounting firms such as PricewaterhouseCoopers and KPMG.

Mortgage Market Role and Programs

Fannie Mae participates in programs and markets central to U.S. housing finance, interacting with securitization frameworks associated with Freddie Mac and Ginnie Mae, conforming loan standards influenced by the Federal Housing Administration and private lenders including Countrywide Financial and Chase Home Finance. It offers products and initiatives aimed at underserved markets similar to programs from NeighborWorks America and Fannie Mae Foundation, and coordinates with mortgage investors including BlackRock and PIMCO. During crises, facilities and interventions involved counterparties such as Federal Reserve Bank of New York and policy instruments discussed by figures like Ben Bernanke. Its underwriting standards, credit risk transfer tools, and automated underwriting systems have affected practices at mortgage originators including Rocket Mortgage and SunTrust Banks.

Financial Performance and Regulation

Fannie Mae’s financial statements and capital position have been central to debates involving the Securities and Exchange Commission, the Federal Housing Finance Agency, and the U.S. Treasury. Its earnings, losses, and accounting practices have been examined in litigation before the United States District Court for the Southern District of New York and subject to settlements with entities like Ernst & Young. Regulatory reforms following the Financial crisis of 2007–2008—including directives from the Dodd–Frank Act and proposals debated by policymakers such as Elizabeth Warren and Jeb Hensarling—have addressed capital requirements, conservatorship terms, and potential paths to reform involving privatization, mutualization, or wind-down strategies debated by stakeholders including Moody's Investors Service and Standard & Poor's.

Controversies and Criticisms

Fannie Mae has faced controversies tied to accounting scandals, executive compensation disputes, and its role in the expansion of mortgage credit before the Financial crisis of 2007–2008. High-profile critiques involved investigations by the Securities and Exchange Commission and hearings before the House Financial Services Committee, with consequential legal actions implicating firms like Ernst & Young and executives formerly from Countrywide Financial. Critics ranging from policymakers such as Betsy DeVos to economists affiliated with Brookings Institution and American Enterprise Institute have debated its impact on housing finance, systemic risk, and taxpayer exposure, while advocates from organizations like National Low Income Housing Coalition and Urban Institute have emphasized affordable housing missions.

Legacy and Impact on Housing Policy

Fannie Mae’s legacy is woven through U.S. housing policy debates involving landmark programs and institutions such as the Federal Housing Administration, Housing and Urban Development Act of 1968, and post-crisis frameworks established by the Federal Housing Finance Agency. Its model of secondary market liquidity influenced securitization practices mirrored by private-label issuers like Countrywide Financial and investment banks including Goldman Sachs, and shaped policy discussions involving senators such as Sherrod Brown and Mark Warner. The organization’s long-term impacts are central to deliberations on access to homeownership, affordable housing initiatives championed by Habitat for Humanity and National Low Income Housing Coalition, and potential restructuring proposals advanced in reports from think tanks such as Urban Institute and Brookings Institution.

Category:Mortgage finance companies of the United States