Fannie Mae


Fannie Mae is the short name of Federal National Mortgage Association (FNMA). It is a government-sponsored company in the United States and was established in 1968. This publicly traded company has the major purpose of expansion of the secondary mortgage market with the idea of MBS (Mortgage-Backed Securities. It allowed the lenders for reinvestment of their assets and reduction of the reliability on local-based savings and loan associations. Its sister concern is Freddie Mac, Federal Home Loan Mortgage Corporation (FHLMC).

It was reported in July 2008 that the company would be taken over by the US government officials with their financial situations getting worse in the US housing crisis. There was a great slump in the real-estate market and the government officials considered the explicit government guarantee through legislation of debt owned by Fannie Mae and Freddie Mae. There was heavy debt on both the companies and the finance-market people acclaimed that the companies will go bankrupt. The whole US mortgage market was underpinned by Fannie and Freddie. The bonds of these companies were owned by money markets and Chinese government and bankruptcy were not possible for them. The government directive for purchasing the bad loans from private banks prevented these banks from falling. The authority of the US Treasury to advance the funds for the stabilization of Fannie Mae is limited by the debt amount permitted by the entire government in the legal terms.

On June 16, 2010, the company announced the de-listing of their stocks from New York Stock Exchange. The direction was given as the stock prices went below $1/ share for 30+ days. Since then, the stocks of the company are traded with the ticker symbol FNMA on the Over the Counter Bulletin Board. The company announced in May 2013 for giving a dividend of about $ 60 billion to the US Treasury. The financial results of the company grew with the dividends paid to the treasury. It resulted in the total dividend payment of $134.5 billion through Dec 2014 which was more than the receipt of the company in support.

Fannie Mae works by borrowing the money at lower rates of interest and re-investing the funds into mortgage-backed securities and whole mortgages. It borrows the debt by selling bonds and providing liquidity to mortgage originators by buying the whole loans. The loans are purchased and are securitized for the investment market. The company works with the compulsion by the law to provide liquidity for mortgaging the originators in all the economic conditions. The company even gets a significant portion of income from the guarantee fees received as a compensation for the assumption of the credit risk on the mortgage loans.

The 52-week range of the FNMA stocks is $ 1.21- $ 3.31. The company has recently announced the 7th sale of re-performing stocks. It has also announced 2 credit insurance risk transfer transactions on the Single-Family loans of $10 Billion value. The company has a lot of competency and would certainly bloom in the years to come.