Fannie Mae: What It Means and how It Works

What Is Fannie Mae?

Fannie Mae (the Federal National Mortgage Association or FNMA) is a government-sponsored enterprise (GSE) established in 1938 to expand the liquidity of home mortgages by creating a secondary mortgage market. Fannie Mae always ranks in the top 25 U.S. corporations by total revenue.

As a secondary market participant, Fannie Mae does not lend money directly to consumers. Instead, it keeps money flowing to mortgage lenders (e.g., credit unions, local and national banks, thrifts, and other financial institutions) through the purchase and guarantee of mortgages made by these firms.

Key Takeaways

• Fannie Mae (the Federal National Mortgage Association or FNMA) is a government-sponsored enterprise (GSE) established in 1938.
• Fannie Mae exists to expand the liquidity of home mortgages by creating a secondary mortgage market. 
• Fannie Mae does not lend money directly to consumers—it keeps money flowing to lenders like banks and credit unions through purchasing and guaranteeing mortgages.
• When mortgages Fannie Mae owns or backs enter foreclosure, Fannie Mae attempts to sell the properties quickly to minimize the potential impact on the community. 
• HomePath includes only properties Fannie Mae owns, including single-family homes, townhouses, and condominiums; Fannie Mae uses local real estate professionals to list the properties for sale. 

Understanding Fannie Mae

When foreclosures arise on mortgages in which Fannie Mae is the owner/backer, or when properties are acquired through deeds in lieu of foreclosure or forfeiture, Fannie Mae attempts to sell the properties in a timely manner to minimize potential impacts on the community.

Via its website, HomePath, Fannie Mae offers a venue where homebuyers and investors can search for, view, and make offers on Fannie Mae-owned properties, and HomePath Mortgage offers financing products for the listed properties. 

Buying a Home From Fannie Mae

HomePath.com includes only properties that are owned by Fannie Mae, including single-family homes, townhouses, and condominiums. Fannie Mae uses local real estate professionals to prepare, maintain and list the properties for sale. Most listings have photographs, descriptions, and other details, including school and neighborhood information.

Important

Fannie Mae properties are sold in “as is” condition, meaning that unlike purchases from a private seller, Fannie Mae will not make any repairs or adjust the purchase price.

The number, type, and sales prices vary greatly by market, as does the condition of the properties. While some homes are move-in ready, others require repairs or even extensive renovations. However, each property is sold in “as is” condition, meaning that what you see is what you get—unlike a private seller, Fannie Mae won’t do any fix-up or adjust the purchase price in lieu of making repairs.

Freddie Mac, Fannie Mae’s brother corporation, was founded in 1970. It was created with a similar mission: to provide liquidity and keep it flowing in the mortgage market. Freddie Mac also operates a website that lists an inventory of homes available for purchase, HomeSteps.com. Their inventory is not as extensive as found on Fannie Mae’s website, HomePath.com, but it does list different properties.

What Does It Mean When a Property Is Owned by Fannie Mae?

Properties owned by Fannie Mae Homepath are foreclosed properties that are sold as is, meaning that Fannie Mae does not repair or renovate them.

What Does It Mean When Fannie Mae Buys Your Mortgage?

Fannie Mae buys mortgage loans from lenders to free up your lender’s ability to make new loans to homebuyers. Typically, you would continue to make your mortgage payment to the same mortgage servicer.

What Are the Benefits of a Fannie Mae Mortgage Loan?

Fannie Mae offers flexible options to help encourage homeownership, including the ability to finance up to 97% of the home’s purchase price. Also, foreclosure prevention and loan modification are available for Fannie Mae loans to those struggling to make their mortgage payments.

The Bottom Line

Fannie Mae is a government-sponsored enterprise (GSE) that helps expand the liquidity of home mortgages by creating a secondary mortgage market. Although Fannie Mae does not lend money directly to consumers, it purchases and guarantees loans from lenders, freeing up those lenders to make new loans. Fannie Mae also has programs to prevent foreclosure through loan modifications.

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