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Asked by: Mikhaylo Agliullin
business and finance housing marketHow does Fannie Mae guarantee mortgages?
Fannie Mae's mortgage-backed securities are purchased by institutions such as insurance companies, pension funds, and investment banks. It guarantees payments of principal and interest on its MBS. Fannie Mae also has its own portfolio, commonly referred to as a retained portfolio.
Thereof, is Fannie Mae guaranteed by the government?
Fannie Mae received no direct government funding or backing; Fannie Mae securities carried no actual explicit government guarantee of being repaid. This was clearly stated in the law that authorizes GSEs, on the securities themselves, and in many public communications issued by Fannie Mae.
Subsequently, one may also ask, what does it mean when Fannie Mae buys your mortgage?
Once Fannie Mae buys a group of mortgages, they're turned into mortgage-backed securities, which are then bought by investment banks, insurance companies and pension funds.
Fannie Mae and Freddie Mac buy mortgages from lenders and either hold these mortgages in their portfolios or package the loans into mortgage-backed securities (MBS) that may be sold. That makes the secondary mortgage market more liquid and helps lower the interest rates paid by homeowners and other mortgage borrowers.