Definition:
Fannie Mae was established in 1938. It was set up to help combat the effects that the Great Depression had on the housing market. It was difficult to find money to borrow for to borrow your home. Fannie Mae is set up to work in the secondary mortgage market—this doesn’t mean second mortgages—but that they buy the loans from the banks and then sell the loans to the investors. This helps the banks to have more liquid funds and to spread the risk out over several different companies and investors.
Fannie Mae was moved to a private organization in 1968. The mortgage crisis of 2007 and 2008 led the US federal government to step up and guarantee the loans that are currently being held by Fannie Mae, in order to stabilize the housing market.
