Aug 19th, 2008
Working Backwards: What’s Fannie Mae?
The Federal National Mortgage Association, known by its initials FNMA which are pronounced “Fannie Mae”, is a former government agency that is now a publicly held corporation and government sponsored enterprise. Fannie Mae is the leader in the United States secondary mortgage market; between it and Freddie Mac (the Federal Home Loan Mortgage Corporation) they either guarantee or own approximately one half of the mortgage market in the U.S., an amount estimated to be about $6 trillion. Fannie Mae’s government charter directs it to make it possible for Americans who are not among the highest wage owners to buy homes.
The subprime mortgage crisis has taken a huge toll on Fannie Mae; its 52 week high on the New York Stock Exchange is $70.57. Currently it is trading at just $6.15, meaning that it has lost more than 91% of its value within the past 52 weeks and is dangerously approaching penny stock territory. Unlike the Government National Mortgage Association (GNMA, also known as “Ginnie Mae”) which is directly backed by the federal government, neither Fannie Mae nor Freddie Mac have a guarantee from the government, instead having implied backing from Washington, D.C.
It is not believed that the government will allow Fannie Mae or Freddie Mac to fold, meaning another taxpayer bailout is a possibility. Concern over the difficulties faced by the two corporations continues to drive their stock prices down and weigh on the entire market.
