Founded in 1938 during the Great Depression as part of President Roosevelt’s New Deal, the Federal National Mortgage Association (FNMA), better known as Fannie Mae, is a government-sponsored enterprise with the purpose of expanding the secondary mortgage market. By securitizing mortgages and allowing lenders to reinvest their assets, Fannie Mae in effect increases the number of lenders in the mortgage market. However, the mortgage crisis from late 2007 caused Fannie Mae’s stock to plunge and the company was eventually placed into conservatorship of the Federal Housing Finance Agency, a controversial move that angered a number of shareholders and taxpayers. Read on to find out five things you might not know about Fannie Mae.
5. Mortgages Aren’t Issued
Contrary to what many may think, Fannie Mae doesn’t actually make its money by issuing mortgages. Instead, the enterprise makes its money by buying mortgages from banks and guaranteeing them. Fannie Mae then bundles a number of mortgages together to create mortgage-backed security that it will then collect payments off of.
4. Fannie Mae is Huge and Continually Growing
Fannie Mae’s assets amount to a number that is just about equal to that of Wells Fargo and Citigroup’s assets combined–$3.3 trillion dollars. Not only is Fannie Mae huge, but it’s continually growing as well. In June of last year, the company grew its assets by roughly 2% since December 2012, equating to a growth of $60 billion.
3. It Actually Helps the Mortgage Market
Surprisingly, Fannie Mae actually does a lot of good for the U.S. economy. By guaranteeing loans, the government-sponsored enterprise provides important liquidity in the mortgage markets. Without Fannie Mae’s guarantees, banks wouldn’t be willing to issue long-term mortgages that allow millions to buy homes every year.
2. Wal-Mart Earned Less Income
Not only is Fannie Mae enormous and constantly growing, but it still makes a ton of money despite numerous bailouts. In the first six months of 2013, Fannie Mae earned over $20 billion in pre-tax income while in 2012, the company earned $17.2 billion–that’s more than General Electric Company ($13.6 billion) and Wal-Mart Stores, Inc. ($17.0 billion).
1. Shareholders Don’t Matter
Since Fannie Mae and its smaller partner Freddie Mac were both placed into conservatorship in 2008, the company is now being run by the Federal Housing Finance Agency, meaning that the FHFA assumed all the powers of the shareholders, directors and officers. Even though you can still buy stock in the company, Fannie Mae’s first and only priority is that of the conservator.
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