"Fannie Mae" is a publicly owned corporation established by Congress in 1938 as an official agency of the federal government. FNMA was created to develop a secondary market for mortgage loans by purchasing and selling FHA-insured mortgage loans. Congress authorized it in 1948 to purchase VA-guaranteed mortgages.

In 1968, Congress divided Fannie Mae into two organizations, the present Fannie Mae and the Government National Mortgage Association (GNMA), a government agency within the Department of Housing and Urban Development. FNMA then became a private corporation. Its present charter authorizes it to increase the flow of funds through the secondary market to mortgage lenders and to operate with private capital on a self-sustaining basis. Although federal ownership of Fannie Mae has ended, the U.S. Department of Housing and Urban Development and the U.S. Department of Treasury oversee the corporation. Five of the 18 members of Fannie Mae's Board of Directors are appointed by the President of the United States. The corporation's shareholders elect the remaining directors.

In 1972, Fannie Mae began to purchase conventional mortgage loans, mortgages not insured or guaranteed by a government agency. In 1981, Fannie Mae established the first national secondary market for second mortgages.

FNMA purchases single-family and multi-family mortgage loans, which meet its underwriting criteria, from approved mortgage bankers and originating mortgage lenders throughout the United States. These include commercial banks, thrift institutions, mortgage bankers, credit unions, state and local housing finance agencies (HFAs), and others. By purchasing mortgages from these institutions, Fannie Mae replenishes the lenders' funds for home mortgage loans. Until 1981, Fannie Mae held in its portfolio most of the mortgages it purchased from primary lenders. In 1981, it began to issue and guarantee Mortgage-Backed Securities in order to raise funds with which to purchase mortgages.

Fannie Mae packages the loans, which it purchases, into Mortgage-Backed Securities (MBS). It guarantees them and sells them to investors through security dealers. (Major U.S. and international securities dealers offer Fannie Mae MBS.) Alternatively, FNMA may retain mortgages in its portfolio, financing them by the sale of bonds to investors.

When MBS (Mortgage-Backed Securities) are issued, the pools of mortgage loans are converted into bond-like instruments, which are traded in a very active market. Fannie Mae passes through to investors their pro rata share of principal and interest payments from the pools of mortgages. It guarantees the timely receipt of these payments of interest and principal by investors.

Mortgage-backed Securities also serve as the foundation for several other securities with innovative structures, including Stripped Mortgage-Backed Securities (SMBS) and Real Estate Mortgage Investment Conduits (REMICs).

In addition, approved lending institutions may assemble groups or pools of mortgage loans to be guaranteed by FNMA and issued as securities. Fannie Mae may review the quality of the loans and then guarantee, for a fee, the Mortgage-Backed Securities issued by these lending institutions. A smaller, but growing, segment of Fannie Mae income is derived from the issuance and fee income of Real Estate Mortgage Investment Conduits (REMICs), multiple-class securities backed by standard MBS.

Fannie Mae has $526 billion in assets and an additional $662 billion in Mortgage-Backed Securities. It is the nation’s largest corporation in terms of assets and one of the largest issuers of debt in the United States after the U.S.Treasury. Further, it is the world’s largest non-financial services company in terms of assets under management and the nation’s largest source of financing for home mortgages. Since 1970, Fannie Mae has provided nearly $2.4 trillion of mortgage financing for more than 30 million families.