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Unformatted text preview: rmally established by Congress in 1938 provide a secondary market for mortgages. It remained a part of the federal government until 1968, when it became a private corporation. It is now a profit–making, tax–paying agency which raises capital and uses its funds to purchase conventional and government–underwritten mortgages, and transforms its mortgage pools to securities. FNMA stock is now listed on the New York Stock Exchange.
Even though it is private, the corporation has a public purpose and maintains strong government ties. It is subject to some regulations by the Department of Housing and Urban Development (HUD). It also has the ability to tap the U.S. Treasury if necessary. Fannie Mae issues a security backed by conventional loans and operates the issuance of its securities much like Freddie Mac. It buys mortgages from lenders, places them in a pool, and issues a security. The security is sold to investors, who receive a guarantee, that principal and interest will be paid monthly, whether or not payments have been collected from the borrowers. Fannie Mae charges a monthly fee for the guarantee. CHARACTERISTICS OF FANNIE MAE
The FNMA or “Fannie Mae” is the largest single mortgage investor in the country. FNMA is a federally sponsored secondary mortgage market agency. Secondary Market Role – FNMA is the largest and oldest major secondary money market for mortgage notes. Loans Purchased – FNMA purchases existing FHA, DVA, and conventional loans, and makes advance commitments to purchase future loans. Sale of Loans – FNMA auctions loan portfolios (groups of loans) to investment groups and individuals. Organization – Stockholder owned, FNMA is headed by a 15–member board of directors, five appointed by the President of the United States and ten elected by stockholders. It is subject to policy supervision by the Department of Housing and Urban Development and regulation in credit markets by the Treasury. FNMA is authorized to borrow directly from the Treasury, but the authority has never been used.
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This note was uploaded on 12/30/2010 for the course SOC 101 taught by Professor Zhung during the Spring '10 term at Punjab Engineering College.
- Spring '10