Many of you have heard the name Fannie Mae but are unaware of how the company impacts your mortgage. Fannie Mae is a national mortgage company, but we do not offer home loans. Instead, we stand behind mortgage lenders – local and nationwide banks, thrifts, credit unions, and other financial institutions in all 50 states – to purchase or securitize the mortgage loans they make, helping to replenish their funds so they can lend to other homeowners. Chartered by Congress in 1938, the company has provided liquidity, stability, and affordability to the U.S. housing market for more than 70 years.
As part of our mission, Fannie Mae keeps money flowing to the housing market during all housing cycles, good and bad, to help ensure that families throughout the country may continue to buy, refinance, or rent their homes. Fannie Mae provides a bridge between front-line lenders and sources of capital throughout the world by creating and selling agency securities. The availability of capital through Fannie Mae helps lenders offer fixed-rate loans to their customers.
Our liquidity mission has never been more critical than it is right now as our country recovers from the worst housing crisis since the Great Depression. In uncertain economic times, investors who help supply private mortgage financing tend to leave the market altogether or begin charging exorbitant rates. During the most recent economic downturn, investor willingness to purchase non-agency, or private label securities (PLS), substantially declined. Fannie Mae has helped to support lenders with the liquidity they needed to continue making affordable mortgage loans.
A decade ago Fannie Mae and Freddie Mac (GSEs) were the primary suppliers of secondary- mortgage market finance, much like today’s marketplace. In 2003, the share of the private securitization market for mortgages began to increase, and over time exceeded more than half the market in 2006. As the housing market began to slow in 2006 and 2007 and the performance of PLS declined, many investors fled the PLS market and PLS issuance dropped dramatically. In the absence of new PLS, the GSE share of long-term funding for new mortgage originations doubled between 2006 and 2010, reaching nearly 70 percent in 2010. Fannie Mae’s efforts provided nearly $2 trillion in liquidity to the mortgage market from January 1, 2009 through June 30, 2011.
Fannie Mae is working hard to help ensure that working Americans who buy homes can afford them over the long term. In fact, loans we purchased and securitized at the height of the housing boom continue to perform better than PLS. For example, serious delinquency rates on loans acquired by Fannie Mae were 4.08 percent at the end of the second quarter of 2011. Comparatively, according to industry information provider CoreLogic, mortgages backing PLS had a serious delinquency rate of 25.5 percent at the end of the same quarter.*
To assist mortgage borrowers who are having trouble meeting the obligation of their existing mortgages, we have established one of the largest foreclosure prevention operations in the country. From January 1, 2009 through June 30, 2011, we helped more than 874,000 homeowners struggling to pay their mortgages work out their loans. We believe that helping distressed homeowners helps to protect neighborhoods, home values, and the overall housing market.
Our housing markets remain weak as our country continues to endure high levels of unemployment and home price declines. We are committed to building a better foundation for housing in the future and getting America’s mortgage markets back on track.
Chief Administrative Officer
General Counsel and Corporate Secretary
* Data source: CoreLogic/LoanPerformance. Loans are seriously delinquent if they are 90 days or more past due or in the foreclosure process.
October 5, 2011