Fannie Mae

The Federal National Mortgage Association, known colloquially as Fannie Mae, was established by the U.S. government in 1938 to help make mortgages more widely available to low income families. It became a government sponsored enterprise (GSE) in 1968 when the government converted it to a shareholder-owned entity to remove it from the balance sheet of the federal budget. It no longer guaranteed government-issued mortgages. This task was transferred to the new Government National Mortgage Association (Ginnie Mae). In 1970 the U.S. government launched the Federal Home Loan Mortgage Corporation, colloquially known as Freddie Mac, to compete with Fannie Mae and make the secondary mortgage market more liquid and efficient. Fannie Mae's purpose since then has been to purchase and securitise mortgages to ensure that funds are available to the mortgage institutions that lend money to home buyers. The plunge in U.S. house prices after 2006 and the subprime mortgage crisis that followed put Fannie Mae and Freddie Mac under severe strain as they owned or guaranteed about half the $12 trillion mortgage market. Fannie Mae lost nearly $59 billion in 2008. As of 2009, they both operate under a legal status known as conservatorship in which they were placed by the government in 2008 to ensure that their mortgage losses would not cripple their ability to support housing. The U.S. Treasury has agreed to inject up to $400 billion in capital into them to ensure they are able to keep funding housing.

See also: http://www.fanniemae.com/, Securitization