Impacts of Fannie Mae on real estate finance
Fannie Mae is a government-sponsored enterprise that was founded in 1938 to revitalize the economic programs of the real estate during the great depression. It later turned to be a traded company by the public. Increasing the mortgage lending and ownership of homes among individuals living in the USA is the essential background to this program.
Fannie Mae has been mandated the legal obligations to provide increment on the rate of lending to low-income households. The association implemented the directive on the gradual purchase of the mortgages, which are risky and include temporary teaser on the financial borrowing rates. The action has made the low credit score borrowers unable to repay. Fannie Mae, therefore, facilitates the secondary mortgage market, thereby providing the lenders with the opportunity to resell the mortgages that originate from the market. The lenders are, therefore, able to use the funds in the creation of more loans. In a situation where there are no secondary markets, individuals will have to keep the mortgages on their books.
The enterprise has also provided liquidity to the borrowers. Liquidity is achieved through continuous investments to the market, thereby enhancing the pooling of loans into the backed securities of the mortgage. To perform this, Fannie Mae ensures that mortgage lender complies by the lending statement issued by the federal government, which addresses the associated risks.
Lastly, Fannie Mae has offered several business associative and options for credit to the homeowners. The association works with lending institutions like to help people having challenges in obtaining finance. For example, the provision of HomeReady Mortgage to the members.
To conclude, Fannie Mae continues to evaluate its approaches in the effort to achieve organizations objective to provide mitigations on the losses which arises in the multifamily portfolios. Continuous risk assessments and provision of the oversight programs are undertaken based on the underlying tools to ensure composite safety.