How Does Fannie Mae Promote Home Ownership

It has been the American policy to promote home ownership. So in order for citizens to possess their own homes, the government was set up financial institution to make the financing of home purchase quick, convenient, and as easy as possible. This is the social responsibility of the government to the minority, and low-income family. It essentially adds a larger cushion to the practice of lending, so that future losses could be more easily absorbed. However, it is particularly interesting to note that the new structure has not been proven to provide adequate protection, and more importantly, has done little to legislate the protection of the borrower in the first place (Watkins, 2011)With that in mind, in 1938 government set up Fannie Mae (The Federal Nation Mortgage Association

Fannie Mae primary goal is to provide a secondary market for home mortgages. This meant that if a bank granted a mortgage to borrower and later the bank needed funds the bank could readily sell the mortgage to borrower and later the bank needed funds the bank could readily sell the mortgage to Fannie Mae. However, in order for lending institutions to have access to the secondary mortgage market of Fannie Mae those institutions had to abide by Fannie Mae’s rules. Later, after Fannie Mae became private company, the Federal Government needed to create another institution to competed in the secondary mortgage market with Fannie Mae. By, 1970, the Federal Government created the Federal Home Loan Mortgage Corporation (FHLMC), nickname Freddie Mae. Freddie Mae goal is to expanding the secondary mortgage market. Fannie Mae and Freddie Mae did not lend money directly to consumers or borrowers. Instead they purchases loans that banks make on what is called the secondary market. Their intention is to increase the number of minority and low income family to own their home (Hagerty,