What is FNMA in real estate?

What is FNMA in Real Estate?

FNMA stands for the Federal National Mortgage Association, commonly known as Fannie Mae. It's a government-sponsored enterprise (GSE) in the United States that plays an important role in the secondary mortgage market. Established in 1938 as part of the New Deal, its main purpose is to expand the secondary mortgage market by securitizing mortgages into mortgage-backed securities (MBS), allowing lenders to reinvest their assets into more lending and in turn increase the number of lenders in the mortgage market.

By securitizing mortgages, Fannie Mae helps to ensure a reliable source of funds for housing loans, making it possible for more Americans to buy, refinance, or rent homes. Although it operates as a government-sponsored enterprise, Fannie Mae is a publicly-traded company. It works by purchasing mortgages from lenders, packaging them into MBS, and selling them to investors on the open market. This process helps to provide liquidity, stability, and affordability to the U.S. housing market.

Fannie Mae's activities are meant to make homeownership more accessible for low-, moderate-, and middle-income Americans by providing lenders with the liquidity to offer more mortgage loans at lower costs. However, it's important to note that Fannie Mae does not originate loans directly to consumers; rather, it operates in the secondary mortgage market, dealing with lenders.