Fannie Mae

From Recessipedia

The Federal National Mortgage Association, commonly known as Fannie Mae, is a government sponsored entity that has the mandate to purchase and securitize mortgages to ensure the availability of funds to the banking and financial institutions that lend money to home buyers.

Combined with Freddie Mac, these entities owned or guaranteed half of the $12 Trillion US mortagage market. ^[1] Through various measures enacted by President George W. Bush's administration, like the 2002 Single-Family Affordable Housing Tax Credit Act and the 2003 American Dream Downpayment Act, Fannie Mae was integral in fuelling the asset bubble in homes prices, particularly in lower-income, higher-risk homes. Fannie's role as a political lever for low-income housing has been in place since the Carter Administration's 1977 Community Reinvestment Act and was further enhanced by the Clinton Administration in 1999. ^[2]

Rumours of Fannie's risks began surfacing as early as 2003 ^[3] and as the mortgage crisis hit in 2007, Fannie's loan book began to unravel. On September 7, 2008, the Federal Housing Finance Agency (FHFA) announced that Fannie Mae and Freddie Mac were being placed into conservatorship. ^[4]

Notes

1. ↑ Duhigg, Charles, "Loan Agency Woes Swell From a Trickle to a Torrent" New York Times (July 11 2008): http://www.nytimes.com/2008/07/11/business/11ripple.html?ex=1373515200&en=8ad220403fcfdf6e&ei=5124&partner=permalink&exprod=permalink
2. ↑ Holmes, Steven A., "Fannie Mae Eases Credit to Aid Mortgage Lending" New York Times (September 30 1999): http://www.nytimes.com/1999/09/30/business/fannie-mae-eases-credit-to-aid-mortgage-lending.html
3. ↑ Berenson, Aaron "Fannie Mae's Loss Risk Is Larger, Computer Models Show" New York Times (August 7 2003): http://www.nytimes.com/2003/08/07/business/fannie-mae-s-loss-risk-is-larger-computer-models-show.html?sec=&spon=&pagewanted=all=
4. ↑ Goldfarb, Zachary A., Cho, David, Appelbaum, Binyamin, "Treasury to Rescue Fannie and Freddie" Washington Post (September 7 2008): http://www.washingtonpost.com/wp-dyn/content/article/2008/09/06/AR2008090602540.html?hpid=topnews