Mortgage help – what is the role of Fannie Mae?

Mortgage help refers to the different types of assistances provided to the mortgage borrowers and lenders. Fannie Mae, which is also known as the Federal National Mortgage Association has been playing a significant role in providing this type of help to the home buyers and lenders from 1938. In the later years of 1960s, Fannie Mae was transformed to a privately owned company from a government run program.

How does Fannie Mae function and what kind of mortgage help does it provide?

Fannie Mae does not operate directly with home buyers; rather it stimulates and smoothens the mortgage economy of the United States through purchasing mortgages from the primary lenders. In this way, the primary lenders enjoy higher liquidity and are able to take additional risk by lending to borrowers with low to middle range income. 

Fannie Mae may also indirectly assist you to finance your dream home with the help of its MBS or mortgage-backed securities program. This program is another method through which Fannie Mae energizes the primary mortgage market activities.

Nevertheless, if we think from the lender's viewpoint, we understand that the lenders try to avoid risk as much as possible. Unsurprisingly, they turn down those borrowers who have a bad credit history, inadequate savings in their bank accounts and a flawed employment history. Fannie Mae provides a level playing field to the lenders by offering incentives to them for doing business with the borrowers. As a result of this, you are also being helped in your search for a suitable mortgage loan if you are a borrower. By getting hold of the first and second mortgages from the portfolio of the lenders, Fannie Mae is injecting money into the primary market in some respects. Financial institutions like securities firms, savings and loan companies and banks are now motivated to do more business as the risk factor is low.

Obviously, there is a limit or restriction set by Fannie Mae on its help for securing single-family individual mortgage loans. If you are an affluent person, then you should not anticipate that Fannie Mae would come for your help. But if you are searching for a single-family mortgage loan of around $410,000 or lower, Fannie Mae might be there to help you out.

For second mortgage loans, Fannie Mae provides assistances to the extent of approximately $208,000. For the residents of Alaska and Hawaii, the assistances are available to the extent of almost $308,000 or higher.

Fannie Mae functions in close co-operation with the U.S. government and benefits by a charter with the Congress. However, it does not get any funds from a particular Federal agency directly. It pays hundreds of million dollars as tax payment each year.
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One Response to this post

  1. jessica on August 11, 2010 at 3:44 AM

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