Fannie Mae is a shareholder-owned company with a public mission. We exist to expand affordable housing and bring global capital to local communities in order to serve the U.S. housing market. Fannie Mae has a federal charter and operates in America's secondary mortgage market to ensure that mortgage bankers and other lenders have enough funds to lend to home buyers at low rates. In 2008, we mark our 70th year of service to America's housing market. Our job is to help those who house America.
Most of that is pretty clear. What might not be clear is the term, "secondary mortgage market." Here's what that means. When banks and mortgage companies make loans, they usually sell them to someone in the secondary mortgage market. When we bought our first home we used Sunshine Mortgage, but within a a couple of weeks we got a letter from citi-bank saying that they had bought out mortgage. Nothing about the mortgage terms and conditions changed, just who we sent the check to.
Why do we need a secondary mortgage market? So banks and mortgage companies can stay liquid. Here's an example. Let's say that Sunshine Mortgage has 10 million dollars to lend out on Monday morning. Every day that week they make 2 loans for $500,000. At the end of the week, they are out of money. They will be getting monthly payments on all of those loans, but it will be months before they can make any more mortgage loans.
But, because of the secondary mortgage market, banks can sell their loans and have cash to make new ones. Why am I telling you about Fannie Mae? Because I want you to be well educated real estate shoppers, and because what she says has a big impact on the market. I'll explain more later...
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