Background and early decades Historically, most housing loans in the early 1900s in the United States were short term mortgage loans with
balloon payments. The Great Depression weakened the U.S. housing market, as people lost their jobs and were unable to make payments. By 1933, an estimated 20 to 25% of the nation's outstanding mortgage debt was in default. This resulted in foreclosures in which nearly 25% of America's homeowners lost their homes to banks. To address this, Fannie Mae was established by the U.S. Congress in 1938 by amendments to the
National Housing Act as part of
Franklin Delano Roosevelt's New Deal. Originally chartered as the National Mortgage Association of Washington, the organization's explicit purpose was to provide local banks with federal money to finance home loans in an attempt to raise levels of home ownership and the availability of affordable housing. For the first thirty years following its inception, Fannie Mae held a monopoly over the secondary mortgage market. Other considerations may have motivated the New Deal focus on the housing market: about a third of the nation's unemployed were in the building trade, and the government had a vested interest in getting them back to work by giving them homes to build. Fannie Mae was acquired by the
Housing and Home Finance Agency from the Federal Loan Agency as a constituent unit in 1950. In 1954, an amendment known as the Federal National Mortgage Association Charter Act made Fannie Mae into "mixed-ownership corporation", meaning that federal government held the
preferred stock while private investors held the
common stock; In the 1968 change, arising from the
Housing and Urban Development Act of 1968, Fannie Mae's predecessor (also called Fannie Mae) was split into the current Fannie Mae and the
Government National Mortgage Association ("Ginnie Mae"). Ginnie Mae, which remained a government organization, guarantees FHA-insured mortgage loans as well as
Veterans Administration (VA) and
Farmers Home Administration (FmHA) insured mortgages. As such, Ginnie Mae is the only home-loan agency explicitly backed by the full faith and credit of the United States government. In 1970, the federal government authorized Fannie Mae to purchase conventional loans, i.e. those not insured by the FHA, VA, or FmHA, and created the
Federal Home Loan Mortgage Corporation (FHLMC), colloquially known as Freddie Mac, to compete with Fannie Mae and thus facilitate a more robust and efficient secondary mortgage market. In 1981, Fannie Mae issued its first mortgage pass-through and called it a
mortgage-backed security. Ginnie Mae had guaranteed the first mortgage pass-through security of an approved lender in 1968 and in 1971 Freddie Mac issued its first mortgage pass-through, called a
participation certificate, composed primarily of private mortgage loans. The Act amended the charter of Fannie Mae and Freddie Mac to reflect the Democratic Congress' view that the
GSEs "have an affirmative obligation to facilitate the financing of affordable housing for low- and moderate-income families in a manner consistent with their overall public purposes, while maintaining a strong financial condition and a reasonable economic return". For the first time, the GSEs were required to meet "affordable housing goals" set annually by the
Department of Housing and Urban Development (HUD) and approved by Congress. The initial annual goal for low-income and moderate-income mortgage purchases for each GSE was 30% of the total number of dwelling units financed by mortgage purchases and increased to 55% by 2007. In 1999, Fannie Mae came under pressure from the
Clinton administration to expand mortgage loans to low and moderate income borrowers by increasing the ratios of their loan portfolios in distressed inner city areas designated in the
Community Reinvestment Act (CRA) of 1977. In 1999,
The New York Times reported that with the corporation's move towards the subprime market "Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980s." In 2000, because of a re-assessment of the housing market by
HUD, anti-predatory lending rules were put into place that disallowed risky, high-cost loans from being credited toward affordable housing goals. In 2004, these rules were dropped and high-risk loans were again counted toward affordable housing goals. The intent was that Fannie Mae's enforcement of the underwriting standards they maintained for standard conforming mortgages would also provide safe and stable means of lending to buyers who did not have prime credit. As
Daniel Mudd, then president and CEO of Fannie Mae, testified in 2007, instead the agency's underwriting requirements drove business into the arms of the private mortgage industry who marketed aggressive products without regard to future consequences:
Alex Berenson of
The New York Times reported in 2003 that Fannie Mae's risk was much larger than was commonly believed.
Nassim Taleb wrote in
The Black Swan: "The government-sponsored institution Fannie Mae, when I look at its risks, seems to be sitting on a barrel of dynamite, vulnerable to the slightest hiccup. But not to worry: their large staff of scientists deem these events 'unlikely'". On January 26, 2005, the
Federal Housing Enterprise Regulatory Reform Act of 2005 (S.190) was first introduced by U.S. Senator
Chuck Hagel. The Senate legislation was an effort to reform the existing GSE regulatory structure in light of the recent accounting problems and questionable management actions leading to considerable income restatements by the GSEs. After being reported favorably by the Senate's Committee on Banking, Housing, and Urban Affairs in July 2005, the bill was never considered by the full Senate for a vote. The legislation met with opposition from both Democrats and Republicans at that point and the Senate never took up the House passed version for consideration after that.
The mortgage crisis from late 2007 Following their mission to meet federal
Housing and Urban Development (HUD) housing goals, GSEs such as Fannie Mae, Freddie Mac and the Federal Home Loan Banks (FHLBanks) had striven to improve home ownership of low and middle income families and underserved areas generally through special affordable methods such as "the ability to obtain a 30-year fixed-rate mortgage with a low
down payment ... and the continuous availability of mortgage credit under a wide range of economic conditions". Then in 2003–2004, the
subprime mortgage crisis began. The market shifted away from regulated GSEs and radically toward Mortgage Backed Securities (MBS) issued by unregulated private-label securitization (PLS) conduits, typically operated by investment banks. As loan originators began to distribute more and more of their loans through private label PLS's, the GSEs lost the ability to monitor and control loan originators. Competition between the GSEs and private securitizers for loans further undermined GSEs' power and strengthened mortgage originators. This contributed to a decline in underwriting standards and was a major cause of the
2008 financial crisis. Investment bank securitizers were more willing to securitize risky loans because they generally retained minimal risk. Whereas the GSEs guaranteed the performance of their mortgage-backed securities (MBSs), private securitizers generally did not, and might only retain a thin slice of risk. Often, banks would offload this risk to insurance companies or other counterparties through
credit default swaps, making their actual risk exposures extremely difficult for investors and creditors to discern. The shift toward riskier mortgages and private label MBS distribution occurred as
financial institutions sought to maintain earnings levels that had been elevated during 2001–2003 by an unprecedented refinancing boom due to historically low interest rates. Earnings depended on volume, so maintaining elevated earnings levels necessitated expanding the borrower pool using lower underwriting standards and new products that the GSEs would not (initially) securitize. Thus, the shift away from GSE securitization to private-label securitization (PLS) also corresponded with a shift in mortgage product type, from traditional, amortizing,
fixed-rate mortgages (FRMs) to nontraditional, structurally riskier, nonamortizing, adjustable-rate mortgages (ARM's), and to the start of a sharp deterioration in
mortgage underwriting standards. The government officials also stated that the government had also considered calling for explicit government guarantee through legislation of $5 trillion on debt owned or guaranteed by the two companies.
U.S. Treasury Secretary
Henry M. Paulson as well as the White House went on the air to defend the financial soundness of Fannie Mae in a last-ditch effort to prevent a total financial panic. At that point, Fannie and Freddie underpinned the whole U.S. mortgage market. As recently as 2008, Fannie Mae and Freddie Mac had owned or guaranteed about half of the U.S.'s $12 trillion mortgage market (). If they were to collapse, mortgages would become harder to obtain and much more expensive. Since Fannie and Freddie
bonds were owned by a variety of investors from the
Chinese government to
money market funds and the retirement funds of hundreds of millions of people, bankruptcy would lead to mass upheaval on a global scale. The Administration PR effort was not enough, by itself, to save the GSEs. Their government directive to purchase bad loans from private banks, in order to prevent these banks from failing, as well as the 20 top banks falsely classifying loans as AAA, caused instability. Paulson's plan was to go in swiftly and seize the two GSEs, rather than provide loans as he did for
AIG and the major banks; he told president Bush that "the first sound they hear will be their heads hitting the floor", in a reference to the
French Revolution. In addition, a lawsuit has been filed against the federal government by the shareholders of Fannie Mae and Freddie Mac, for a) creating an environment by which Fannie and Freddie would be unable to meet their financial obligations b) forcing the executive management to sign over the companies to the conservator by (a), and c) the gross violation of the (
fifth amendment) taking clause. On September 7, 2008, James Lockhart, director of the
Federal Housing Finance Agency (FHFA), announced that Fannie Mae and
Freddie Mac were being placed into
conservatorship of the FHFA. The action was "one of the most sweeping government interventions in private financial markets in decades". Lockhart also dismissed the firms' chief executive officers and boards of directors, and caused the issuance to the Treasury new senior preferred stock and common stock warrants amounting to 79.9% of each GSE. The value of the common stock and preferred stock to pre-conservatorship holders was greatly diminished by the suspension of future dividends on previously outstanding stock, in the effort to maintain the value of company debt and of mortgage-backed securities. FHFA stated that there are no plans to liquidate the company. The authority of the U.S. Treasury to advance funds for the purpose of stabilizing Fannie Mae or Freddie Mac is limited only by the amount of debt that the entire federal government is permitted by law to commit to. The July 30, 2008, law enabling expanded regulatory authority over Fannie Mae and Freddie Mac increased the national debt ceiling by US$800 billion (), to a total of US$10.7 trillion in anticipation of the potential need for the Treasury to have the flexibility to support the federal home loan banks.
2010 – delisting On June 16, 2010, Fannie Mae and Freddie Mac announced their stocks would be delisted from the NYSE. The Federal Housing Finance Agency directed the delisting after Fannie's stock traded below $1 a share for over 30 days. Since then the stocks have continued to trade on the
Over-the-Counter Bulletin Board.
Dividends paid to government In May 2013, Fannie Mae announced that it is going to pay a dividend of $59.4 billion () to the United States Treasury. In 2014, gross flows were: • $116 billion received from Treasury • $134 billion paid to Treasury () Fannie Mae's 2014 financial results enabled it to pay $20.6 billion in dividends to Treasury for the year, resulting in a cumulative total of $134.5 billion in dividends through December 31, 2014 – approximately $18 billion more than Fannie Mae received in support. As of March 31, 2015, Fannie Mae expects to have paid a total of $136.4 billion in payments to the Treasury.
2015 ruling – present On May 11, 2015
The Wall Street Journal reported that A U.S. District Court judge said
Nomura Holdings Inc. was not truthful in describing mortgage-backed securities sold to Fannie Mae and
Freddie Mac, giving a victory to the companies' conservator, the
Federal Housing Finance Agency (FHFA).
Judge Denise Cote asked the FHFA to propose updated damages to be paid by Nomura and co-defendant
RBS Securities Inc., which underwrote some of the investments. At the outset of the case, the FHFA asked for about $1.1 billion. The order brought to conclusion a rare trial addressing alleged mortgage-related infractions committed during the housing boom. Over the past few years, more than a dozen firms chose to settle similar allegations brought by the FHFA rather than face a court battle. The
settlements have brought Fannie and Freddie $18 billion in penalties. In her decision, Judge Cote wrote that Nomura, in offering documents for
mortgage-backed securities sold to Fannie and Freddie, didn't accurately describe the loans' quality. "The magnitude of falsity, conservatively measured, is enormous", she wrote. During the boom, Fannie and Freddie invested billions of dollars in mortgage-backed securities issued by such companies as Nomura. Those investments bolstered profits but, in the bust, contributed to steep losses that ultimately resulted in the companies' 2008 government takeover. Nomura and RBS were two of 18 financial institutions, including
Bank of America Corp. and
Goldman Sachs Group Inc., targeted in 2011 by the FHFA, which alleged that the companies lied about the quality of the loans underlying the securities. During the nonjury trial, lawyers for the FHFA said that Nomura and RBS inflated values of homes behind some mortgages and sometimes said a home was owner-occupied when it was not. In October 2025, top Fannie Mae executives were fired after internally questioning the release by marketing head Lauren Smithan associate of
Bill Pulte, the
Trump administration's FHFA directorof confidential mortgage pricing data to Freddie Mac, a principal competitor. Per the
Associated Press, "[w]hile Smith still holds her position, the senior Fannie Mae officials who called her conduct into question were all forced out of their jobs late [October], along with internal ethics watchdogs who were investigating Pulte and his allies." ==Business==