The Federal National Mortgage Association — a government-sponsored enterprise that buys conforming mortgages from lenders, providing liquidity to the housing market.
Full Definition
Fannie Mae (Federal National Mortgage Association) was established in 1938 to expand the secondary mortgage market. It doesn't originate loans directly — it purchases conforming mortgages from banks, credit unions, and mortgage companies, packages them into mortgage-backed securities (MBS), and sells them to investors. This recycling of capital allows lenders to issue new mortgages rather than being constrained by their own balance sheets. Fannie Mae sets guidelines (including loan limits, credit standards, and documentation requirements) that conforming loans must meet. It was placed into federal conservatorship during the 2008 financial crisis and has remained there. Along with Freddie Mac, it backs roughly half of all US mortgages.
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