What is Fannie Mae?

By Liz Clinger Updated on 7/19/2017

Fannie Mae is considered a (GSE) government sponsored enterprise, and its intentions are to purchase mortgages from lenders to sell them at lower costs. This process, called securitizing, intends to assist the housing market in regaining strength. 

The concept is that subsidized mortgage rates entice consumers to purchase more homes.

How Does Fannie Mae Work?

Fannie Mae securitizes bank owned mortgages by creating Mortgage-Backed Securities from their value. The Mortgage-Backed Securities are sold worldwide to investors. Fannie Mae can also purchase properties directly from banks and sell them independent of bank lenders, and one such program would be HomePath. 

Fannie Mae and Freddie Mac are the leaders in the secondary housing markets.