What Is Fannie Mae? | Bankrate

What is Fannie Mae?

Created during the Great Depression in 1938, the Federal National Mortgage Association (FNMA) — colloquially known as Fannie Mae — is a Congressionally chartered enterprise that acts as a major player in the mortgage industry. It is structured as a shareholder-owned company, though it operates now under the control of FHFA, the Federal Housing Finance Agency.

Fannie Mae is what is known as a government-sponsored enterprise (GSE): a private agency or corporation with a federal charter to provide financial services to the public. In Fannie’s case, those financial services revolve around home loans — it performs a variety of functions to back the mortgage industry and, by extension, the housing market.

Along with buying loans from banks and mortgage companies, Fannie Mae sponsors various loan programs that approved financial institutions can then offer to borrowers. To the thousands of banks, credit unions and mortgage companies that finance home purchases, Fannie Mae offers ready access to funds on reasonable terms. But with a stated goal to “expand housing opportunities for everyone in America,” Fannie also indirectly aids individuals.

What does Fannie Mae do?

Fannie Mae does not originate or offer mortgages directly to borrowers. However, it purchases mortgages from lenders that meet its criteria, in effect guaranteeing a market for the loans. (It provides other types of support for rental and multi-family housing as well.)

While Fannie Mae is primarily a loan investor interacting with financial institutions, borrowers can still engage with some of the GSE’s offerings. Specifically, borrowers can participate in a Fannie Mae loan program by applying for one of the loan types that it sponsors.

Here’s a breakdown of what this GSE does for the housing market:

Buys and backs mortgages

Fannie Mae buys home loans and mortgages in the secondary mortgage market (where lenders sell the loans and mortgages they’ve originated). This in turn frees up the lender’s capital so that it can extend new loans to more borrowers.

To qualify for purchase by Fannie Mae, the mortgage needs to fall into the category of FNMA loans. An FNMA loan is one that comes from a lender Fannie Mae has approved and that meets its requirements, including a maximum loan amount (determined by area) and underwriting criteria, like debt-to-income ratio (DTI) and loan-to-value ratio (LTV) limits.

Fannie Mae doesn’t act alone in this — it has a sibling in the Federal Home Loan Mortgage Corporation, known as Freddie Mac. After purchasing mortgages from lenders, both Fannie and Freddie either hold the loans individually or package them into mortgage-backed securities to be sold to investors. Both GSEs serve to keep the mortgage market fluid and well-regulated, so that credit and the flow of funds operate smoothly.

Operates HomePath

HomePath is Fannie Mae’s real estate marketing website. It can be used by prospective homebuyers and real estate agents to search for Fannie Mae–owned properties that are available for purchase.

The condition of the homes available through HomePath may vary. Often, owners have voluntarily conveyed them to Fannie Mae in order to avoid foreclosure. Many have undergone repairs, but some have not.

The HomePath program offers incentives to help owner-occupants buy its homes:

• First Look program: During the first 30 days a home is listed on the site, only owner-occupants have the opportunity to make offers and purchase the property. This eliminates competition from investors for newly listed HomePath properties.
• Income-based closing cost credits: Owner-occupant buyers who have incomes at or below the area’s median income may be eligible for closing cost credits of up to 3 percent of the sale price.
• Closing cost credits for first-time buyers: First-time homebuyers who complete Fannie Mae’s HomeView course through the Ready Buyer program are eligible for a closing cost credit of up to 3 percent.

There are also certain criteria to be aware of when purchasing a home through HomePath, including:

• The homes must be purchased as-is.
• If you’re represented by a real estate agent, your agent must register on the HomePath website in order to submit an offer on your behalf.
• You must be pre-approved for a loan at the time of the offer (if the purchase is being financed).

Runs counseling networks

Fannie Mae directly aids consumers by providing a variety of counseling services. They include information and assistance dealing with financial uncertainty, budgeting, disaster recovery or other types of housing-related challenges.

One of the most well-known options is the Mortgage Help Network, which is free for homeowners who are experiencing financial challenges or who have been impacted by a natural disaster. The program provides no-cost services from counselors that have been approved by the U.S. Department of Housing and Urban Development (HUD).

Fannie Mae loans

You cannot get a loan directly from Fannie Mae — even if it’s one of its own FNMA loans. Instead, you get the loan from a Fannie-approved lender, such as a bank or credit union.

The terms of Fannie Mae loan products are often more generous than those of non-Fannie-sponsored loans, which might require 10 or 20 percent of the property’s price as a down payment. These loans must also meet the Fannie Mae conforming loan limit, which is $806,500 in most parts of the country for 2025.

The loan programs Fannie sponsors include:

• HomeReady: The HomeReady mortgage program is geared toward low-income aspiring homeowners — mainly first-timers, though repeat buyers can apply as well. Participation in the program can help borrowers who cannot qualify for other loans. In fact, it has even lower barriers than an FHA loan (as little as 3 percent down payment, vs. FHA’s 3.5 percent). For first-time homeowners, the completion of a homeowner education program is required.
• 97% LTV program: Often called “Conventional 97,” this program is available to first-time borrowers and consumers refinancing loans that have already been purchased by Fannie Mae. Similar to HomeReady, buyers can pay as little as 3 percent down, creating a 97 percent LTV (loan-to-value) opportunity. There are no income limits with this program.
• HFA Preferred: The HFA Preferred is a low-down-payment conventional mortgage. Together with lenders, Fannie Mae works with Housing Finance Agencies (HFAs) to issue them — HFA loans are offered through Fannie Mae in partnership with state-level housing agencies. Though they offer many of the same perks as FHA loans, they come with cancellable mortgage insurance.
• RefiNow: The RefiNow program extends home refinances to borrowers who have substantial equity in their homes, and it is geared toward helping lower monthly housing costs. RefiNow requires borrowers to make at or less than 100 percent of the area median income, and allows for up to a 65 percent debt-to-income ratio. There is no minimum credit score.

Conservatorship

Leading up to the collapse of the housing market in 2007, Fannie Mae had backed subprime mortgages. Once the market collapsed, it lost millions in defaulted loans; the federal government had to bail it out and placed both Fannie Mae and Freddie Mac under FHFA conservatorship, where they remain today.

However, the housing market has since steadily recovered. Home prices have increased dramatically, foreclosure activity has significantly declined and both GSEs have become solvent again. While Fannie Mae reported losses totaling nearly $59 billion back in 2008, it is now highly profitable, reporting $3.7 billion in net income in the first quarter of 2025 and an overall net worth of over $98 billion.

President Trump has repeatedly floated the idea of removing both GSEs from conservatorship since taking office, but as of now, the situation remains in place.

FAQs

• What’s the difference between Fannie Mae, Ginnie Mae, and Freddie Mac?
  

  Fannie Mae and Freddie Mac are government-sponsored enterprises currently under the purview of the Federal Housing Finance Agency. Freddie Mac was created in 1970 and tends to purchase loans from smaller companies, while Fannie is much older, dating from the Depression years, and tends to purchase loans from larger lenders. Together they own more than half of America’s conforming loans. Ginnie Mae, which is short for the Government National Mortgage Association or GNMA, is a government corporation within the U.S. Department of Housing and Urban Development. It buys government-insured or -guaranteed mortgages typically designed to serve low- and moderate-income buyers such as FHA, USDA and VA loans.

• Why is it called Fannie Mae?
  

  The nickname Fannie Mae draws from the agency’s full name: the Federal National Mortgage Association. It’s a kind of verbalization of the acronym, FNMA.

• Does Fannie Mae loan directly to people?
  

  No, Fannie Mae does not make loans directly to consumers. The agency purchases mortgages or other real estate loans from lenders. Fannie does offer various types of financing programs, though, which can be obtained through an approved lender.