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  • Fannie Mae has a dual role in the US mortgage market.

    Specifically, the corporation buys mortgages that meet its standards from mortgage lenders around the country. It then packages those loans as debt securities, which it offers for sale, providing the investment marketplace with interest-paying bonds.

    The money Fannie Mae raises by selling these bonds pays for purchasing more mortgages. Lenders use the money they realize from selling mortgages to Fannie Mae to make additional loans, making it possible for more potential homeowners to borrow at affordable rates.

    Because lenders want to ensure their mortgage loans are eligible for purchase, most adopt Fannie Mae guidelines in evaluating mortgage applicants.

    Fannie Mae is described as a quasi-government agency because of its special relationship with the federal government. It's also a shareholder-owned corporation whose shares trade on the New York Stock Exchange (NYSE).

  • Browse Related Terms: Agency bond, Fannie Mae, Freddie Mac, Government bond, Government National Mortgage Association (Ginnie Mae), Quasi-public corporation, Sallie Mae, Scripophily

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