Fannie Mae: Government Sponsored Enterprise (FNM)
A quick recap of what has already been discussed leading into the next segment of this paper.
Fannie Mae (FNM) was created in 1938 as a mortgage association and in 1968 it became a Government Sponsored Enterprise (GSE). Freddie Mac (FM) also known as the federal home loan mortgage association was created as a GSE. Both organizations were in the business for buying mortgages from banks and turning them into mortgage backed securities.
The differences of the two GSE’s are that FNM would tend to purchase mortgages from commercial banks while FM would buy from thrift banks (Microeconomics). Both tend to purchase from various types of financial institutions today. Both FNM and FM revel in a government backed loan system that is also known …show more content…
government. As discussed earlier the conservatorship granted FNM and FM bankruptcy rights like those filing with chapter 11 bankruptcies. All assets and the selling of shares were placed on hold beginning September 7, 2008 (Whalen). The FHFA would now regulate the funds of FNM and FM giving it explicit rights and governing home mortgages. To what degree will the FHFA regulate mortgages?
To better understand the regulation of the FHFA, we must first know a little more of the organization and how it became a part of this turmoil. The FHFA was created on July 30, 2008 when President George W. Bush signed into law the Housing and Economic Recovery Act of 2008. This allowed the government to step in and oversee the giant mortgage lenders spending and usage of the governments allotted funds to both FNM and FM.
FHFA’s first course of action was to mandate and direct the Affordable Housing Program subsidy, which would account for the mortgages before 2007 and grant refinancing for home owners at 45% loan to income ratio. This was in due to the fact of interest rates rising and most mortgages were in flexible rate mortgages. When the rates of the mortgages were due to rise, the FHFA knew this would cause more home owners to foreclose on their homes and put a heavier burden on the market. A start to help an already damaged housing market, the FHFA would begin what seemed to be …show more content…
The leverage of FNM comes out to 78 to 1. Bear Stearns another lead mortgage holder had leverage of 33% and in 2008 imploded (Microeconomics). Why were FNM and FMC able to withstand the ratio if not for the government having something to do with these programs? The fed was given a blank check to purchase stock of FNM and FMC the beginning of 2009; thus showing no fiscal control in our government spending. Congress agreed to the purchase which is shown through the inflation environment. What would become of FNM and FM for the future? Would reprivatizing these two giants be the petition or would they simply be laid to rest and other organizations take up the mortgages once belonging to these two GSE’s? The government owned mortgage monopoly, Fannie Mae and Freddie Mac, is currently up for debate on what will become of these two. Both Congress and the Senate are deliberating on what course of action will be best to continue U.S. governments run on the housing market. There are already more government housing districts in rural cities than ever
Fannie Mae (FNM) was created in 1938 as a mortgage association and in 1968 it became a Government Sponsored Enterprise (GSE). Freddie Mac (FM) also known as the federal home loan mortgage association was created as a GSE. Both organizations were in the business for buying mortgages from banks and turning them into mortgage backed securities.
The differences of the two GSE’s are that FNM would tend to purchase mortgages from commercial banks while FM would buy from thrift banks (Microeconomics). Both tend to purchase from various types of financial institutions today. Both FNM and FM revel in a government backed loan system that is also known …show more content…
government. As discussed earlier the conservatorship granted FNM and FM bankruptcy rights like those filing with chapter 11 bankruptcies. All assets and the selling of shares were placed on hold beginning September 7, 2008 (Whalen). The FHFA would now regulate the funds of FNM and FM giving it explicit rights and governing home mortgages. To what degree will the FHFA regulate mortgages?
To better understand the regulation of the FHFA, we must first know a little more of the organization and how it became a part of this turmoil. The FHFA was created on July 30, 2008 when President George W. Bush signed into law the Housing and Economic Recovery Act of 2008. This allowed the government to step in and oversee the giant mortgage lenders spending and usage of the governments allotted funds to both FNM and FM.
FHFA’s first course of action was to mandate and direct the Affordable Housing Program subsidy, which would account for the mortgages before 2007 and grant refinancing for home owners at 45% loan to income ratio. This was in due to the fact of interest rates rising and most mortgages were in flexible rate mortgages. When the rates of the mortgages were due to rise, the FHFA knew this would cause more home owners to foreclose on their homes and put a heavier burden on the market. A start to help an already damaged housing market, the FHFA would begin what seemed to be …show more content…
The leverage of FNM comes out to 78 to 1. Bear Stearns another lead mortgage holder had leverage of 33% and in 2008 imploded (Microeconomics). Why were FNM and FMC able to withstand the ratio if not for the government having something to do with these programs? The fed was given a blank check to purchase stock of FNM and FMC the beginning of 2009; thus showing no fiscal control in our government spending. Congress agreed to the purchase which is shown through the inflation environment. What would become of FNM and FM for the future? Would reprivatizing these two giants be the petition or would they simply be laid to rest and other organizations take up the mortgages once belonging to these two GSE’s? The government owned mortgage monopoly, Fannie Mae and Freddie Mac, is currently up for debate on what will become of these two. Both Congress and the Senate are deliberating on what course of action will be best to continue U.S. governments run on the housing market. There are already more government housing districts in rural cities than ever