Anonymous asked in Business & FinanceRenting & Real Estate · 1 decade ago

What does Fannie Mae do?

Be specific, I don't have the slightest clue of what it is or what it does.

1 Answer

  • 1 decade ago
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    Fannie Mae is a quasi government/private company. Their responsibility is to create liquidity in the credit markets specifically for home buyers.

    They sell loans to home-buyers. They get the money from either governmental programs or from selling loans they have, to investors, who buy the notes.

    Investors like Fannie Mae notes because there is an assurance that they will get paid if the home-owner defaults.

    Generally an investor will buy Fannie Mae notes for about 3-4% (interest rate) above the rate they will get in a money/savings account.

    That is why real estate interest rates have stayed low, because of the money market rates being so low. Money market rates are directly proportionate to the rate at which the Federal Reserve will lend Federal banks.

    We have seen low Fed Reserve rates for some time because of the state of the economy. They raise rates when there is a threat of inflation.

    I could go on, but other than that, take a class in Macro Economics!

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