Federal National Mortgage Association

The Federal National Mortgage Association, commonly known as Fannie Mae, is a United States government-sponsored enterprise that supports mortgage credit by buying eligible residential mortgages from lenders and guaranteeing mortgage-backed securities. It operates in the secondary mortgage market and has been under Federal Housing Finance Agency conservatorship since September 2008.^[1][2]

Overview

Fannie Mae is one of the central institutions in the U.S. housing finance system. Its business is not to originate mortgages directly to homebuyers, but to purchase mortgages from approved lenders, place many of those loans into mortgage-backed securities, and guarantee timely payment of principal and interest on the securities it issues. This activity is intended to provide mortgage lenders with liquidity, allowing them to make additional loans to households and multifamily property owners.^[3]

The company is formally a shareholder-owned corporation created by federal statute, not a federal agency. USAGov describes Fannie Mae as a government-sponsored enterprise under the conservatorship of the Federal Housing Finance Agency, and states that it is not a federal agency.^[4] This distinction is important because Fannie Mae has a public mission and a congressional charter, while its obligations are not the same as direct obligations of the United States government unless explicitly backed under specific agreements.

Fannie Mae’s legal and operating framework connects it to several public institutions. The Federal Housing Finance Agency, or FHFA, supervises Fannie Mae and its companion enterprise Freddie Mac, oversees their housing mission, and has acted as conservator for both enterprises since 2008.^[1] The U.S. Department of the Treasury is also central to Fannie Mae’s post-2008 structure through the senior preferred stock purchase agreement that provides financial support arrangements between Treasury and Fannie Mae through FHFA as conservator.^[5]

Historical development

Fannie Mae was established in 1938 as a federal government agency during the New Deal period.^[6] Its original purpose was to increase the availability of mortgage funds after the Great Depression, when housing finance markets were constrained and long-term mortgage credit was less widely available than in later decades. Fannie Mae’s own history describes its mission as providing liquidity, stability, and affordability in the mortgage market.^[7]

The institution changed materially after World War II as the United States expanded its housing finance system. In 1954, Congress enacted the Federal National Mortgage Association Charter Act, which set out Fannie Mae’s statutory purposes and corporate powers.^[6] In 1968, amendments to the Charter Act transformed Fannie Mae from a federal agency into an entirely shareholder-owned corporation.^[7] That change separated Fannie Mae from the federal budget and gave it the structure of a government-sponsored enterprise rather than a direct government agency.

Fannie Mae’s role expanded along with the growth of the modern secondary mortgage market. By purchasing mortgages and supporting standardized mortgage-backed securities, Fannie Mae helped create a national market in which local lenders could sell loans to investors indirectly. This model reduced the dependence of mortgage lending on local deposit bases and linked U.S. mortgage rates more closely to national and global capital markets.

Business model

Fannie Mae’s principal business is the purchase or securitization of residential mortgage loans. FHFA explains that Fannie Mae and Freddie Mac buy mortgages from lenders and either hold those mortgages in portfolio or package them into mortgage-backed securities that may be sold to investors.^[3] When Fannie Mae issues an MBS, it generally guarantees that investors will receive scheduled principal and interest payments, even if borrowers fail to make their mortgage payments on time.

The guarantee function is central to the company’s economics. Fannie Mae earns guaranty fees for assuming credit risk on the loans backing its securities. These fees compensate the company for expected credit losses, capital costs, administrative costs, and other risks. The enterprise also holds retained mortgage and liquidity portfolios, although post-crisis regulation and agreements with Treasury have constrained the scale and composition of those portfolios.

Fannie Mae reports two main business segments: Single-Family and Multifamily.^[8] The Single-Family business concerns mortgages on one- to four-unit properties, including most owner-occupied home loans. The Multifamily business concerns loans secured by apartment buildings and other rental housing properties. Both segments support Fannie Mae’s statutory mission, but they differ in underwriting, risk management, borrower profiles, property types, and market cycles.

Fannie Mae does not lend directly to consumers. Instead, it works through approved sellers and servicers, which are typically banks, mortgage companies, and other financial institutions. Sellers deliver loans to Fannie Mae under eligibility rules covering borrower credit, loan-to-value ratios, documentation, property standards, and other underwriting characteristics. Servicers collect borrower payments, manage escrow accounts, handle loss mitigation, and report loan performance.

Mortgage-backed securities and credit risk

Fannie Mae mortgage-backed securities are a major form of agency MBS in the United States. The company’s guaranty gives investors exposure to mortgage prepayment and interest-rate risk while shifting much of the underlying mortgage credit risk to Fannie Mae. This structure has made agency MBS a large and liquid fixed-income market closely watched by banks, asset managers, insurers, pension funds, mortgage real estate investment trusts, foreign reserve managers, and the Federal Reserve System.

Credit risk remains an important part of Fannie Mae’s business. If borrowers default and foreclosure recoveries are insufficient, Fannie Mae can incur credit losses. The company manages this risk through underwriting standards, pricing, mortgage insurance requirements on certain high loan-to-value loans, lender representations and warranties, loan quality controls, and credit-risk-transfer transactions. Its loss experience is influenced by employment conditions, home prices, interest rates, borrower leverage, underwriting quality, and regional economic conditions.

Interest-rate risk also matters, but often in ways that differ from bank balance-sheet risk. Fannie Mae-guaranteed MBS investors bear prepayment risk: borrowers may refinance or repay mortgages when rates fall, and prepayments usually slow when rates rise. Fannie Mae’s retained portfolios and guarantee obligations require risk management systems for interest-rate movements, liquidity, counterparty exposures, operational resilience, and model risk.

Conservatorship

On September 6, 2008, FHFA placed Fannie Mae and Freddie Mac into conservatorship with the consent of each enterprise’s board of directors.^[1] The decision came during the global financial crisis, when losses on housing-related assets and doubts about the enterprises’ capital positions threatened confidence in the mortgage market. Under conservatorship, FHFA succeeded to the rights, titles, powers, and privileges of Fannie Mae and its shareholders, officers, and directors with respect to the company and its assets.^[9]

FHFA’s statutory conservatorship authority is designed to preserve and conserve the assets of a regulated entity and to restore it to a sound and solvent condition.^[10] In practice, conservatorship has meant that Fannie Mae continues to operate as a going concern, but major strategic decisions are subject to FHFA oversight. The company’s board and management continue to run day-to-day operations within the framework set by FHFA as conservator and regulator.

Conservatorship is a defining feature of Fannie Mae’s current institutional status. It affects capital policy, dividend policy, executive compensation, business limits, risk appetite, and the treatment of common and preferred shareholders. Although Fannie Mae’s common stock has continued to trade over the counter, the economic position of common and junior preferred shareholders remains subordinate to Treasury’s senior preferred stock and subject to the uncertain outcome of any future restructuring.

Treasury support and preferred stock purchase agreements

At the beginning of conservatorship in 2008, Treasury and FHFA, acting as conservator, entered into a senior preferred stock purchase agreement with Fannie Mae.^[5] The agreement was intended to provide financial stability, support the availability of mortgage finance, and protect taxpayers during the financial crisis. Treasury received senior preferred stock and warrants as part of the support structure.

The senior preferred stock purchase agreement has been amended several times. FHFA’s conservatorship materials list amendments beginning with the original 2008 agreement and later changes, including the 2012 amendment associated with the net-worth-sweep structure and subsequent letter agreements affecting capital retention.^[5] In 2019, FHFA and Treasury announced amendments allowing Fannie Mae and Freddie Mac to retain earnings beyond the $3 billion capital reserves previously allowed under 2017 letter agreements.^[5]

In January 2025, Treasury and FHFA announced further amendments to the preferred stock purchase agreements for Fannie Mae and Freddie Mac. Treasury stated that the amendments were intended to help ensure that any eventual release of the government-sponsored enterprises from conservatorship would be orderly and to reflect certain existing practices.^[11] Treasury also stated that the amendments did not affect the enterprises’ capital retention or dividend payments under the senior preferred shares issued to Treasury.^[11]

The Treasury arrangements distinguish Fannie Mae from a conventional private financial institution. They provide a backstop that has supported market confidence in Fannie Mae’s obligations, but they also create governance, capital, and ownership constraints. The future treatment of the senior preferred stock, Treasury warrants, retained earnings, and capital requirements would be central to any exit from conservatorship.

Regulation and supervision

FHFA is Fannie Mae’s primary safety-and-soundness regulator and housing mission regulator. FHFA states that it is responsible for the supervision, regulation, and oversight of the housing mission of Fannie Mae, Freddie Mac, and the Federal Home Loan Bank System.^[2] FHFA conducts examinations and sets supervisory expectations for risk management, capital, liquidity, governance, model risk, cybersecurity, fair lending controls, and mission activities.

Fannie Mae is also an issuer subject to U.S. securities reporting requirements. It files annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K with the U.S. Securities and Exchange Commission. Its securities disclosures describe financial results, risk factors, conservatorship matters, segment results, credit performance, and material legal and regulatory developments.^[8]

Fannie Mae’s public mission also brings housing-policy oversight. The company reports on affordable housing activities and performance against housing goals established by FHFA.^[12] These activities include support for low- and moderate-income borrowers, underserved markets, and rental housing, though the precise goals and measurement methods are set by regulation and can change over time.

Financial scale and recent reporting

Fannie Mae is among the largest financial institutions in the United States by balance-sheet and guarantee exposure. In its 2025 annual reporting, Fannie Mae stated that it remained a large guarantor of U.S. residential mortgage debt and reported results through Single-Family and Multifamily segments.^[8] In a February 2026 earnings presentation, the company reported full-year 2025 net income of $14.4 billion and year-end 2025 net worth of $109.0 billion.^[13]

Fannie Mae also reported substantial market activity in 2025. Its February 2026 earnings presentation stated that it provided $409 billion of liquidity to the mortgage market during full-year 2025 and helped 1.5 million households buy, refinance, or rent a home.^[13] These figures illustrate the scale of the institution’s role in both home-purchase finance and rental housing finance.

The company’s financial results can vary with credit loss provisions, home-price assumptions, interest rates, guaranty fee income, fair-value changes, and the size and composition of its guaranty book. The enterprise’s reported net worth has grown because earnings retention has been permitted under post-2019 and later Treasury-FHFA arrangements, but its capital position remains governed by conservatorship and Treasury agreement constraints.

Relationship to Freddie Mac and the broader housing finance system

Fannie Mae’s closest institutional counterpart is Freddie Mac, formally the Federal Home Loan Mortgage Corporation. Both enterprises buy mortgages from lenders, guarantee agency mortgage-backed securities, and operate under FHFA supervision and conservatorship.^[3] They differ in historical origins, business relationships, seller-servicer networks, and some product structures, but they perform broadly similar functions in the secondary mortgage market.

Fannie Mae and Freddie Mac are separate from Ginnie Mae, which is a government corporation within the Department of Housing and Urban Development that guarantees securities backed by federally insured or guaranteed loans such as FHA, VA, and certain USDA mortgages. Fannie Mae securities, by contrast, are backed by Fannie Mae’s own guaranty and the Treasury support framework established after 2008, not by the same statutory full-faith-and-credit guarantee associated with Ginnie Mae securities.

Fannie Mae’s role is also distinct from that of banks. Banks may originate mortgages, hold loans, service loans, or invest in MBS. Fannie Mae is primarily a secondary-market intermediary and guarantor. Its activities affect bank balance sheets because lenders can sell eligible mortgages to Fannie Mae, converting mortgage assets into cash or securities and reducing the need to fund all mortgages with deposits or wholesale borrowing.

Policy significance

Fannie Mae is significant because it sits at the intersection of housing policy, financial stability, capital markets, and household credit access. Its activities influence the availability and pricing of long-term fixed-rate mortgages, a product that is unusually prominent in the United States compared with many other countries. By providing a standardized secondary market, Fannie Mae helps connect local mortgage originators with national and global investors.

The enterprise also concentrates public-policy questions. Supporters of the GSE model emphasize liquidity, standardization, and access to mortgage credit during economic stress. Critics have raised concerns about taxpayer exposure, moral hazard, market dominance, and the difficulty of separating public mission from private ownership. The 2008 conservatorship did not end these debates; instead, it made the federal role more explicit and left unresolved questions about the desired long-term structure of U.S. housing finance.

Any future reform could affect mortgage lenders, MBS investors, homebuyers, renters, taxpayers, and shareholders. Key issues include capital requirements, the pricing of government support, the role of private credit risk capital, affordable housing obligations, competition between Fannie Mae and Freddie Mac, and whether the enterprises should remain in conservatorship, be recapitalized, be rechartered, or be replaced by a different housing finance framework.

See also

Fannie Mae is closely related to U.S. Department of the Treasury, Federal Reserve System, and U.S. Securities and Exchange Commission through its funding environment, securities-market reporting, and post-crisis support arrangements.