Fannie Mae-No Politics (FNMA)

[Robert from yahoo bd]

No. 1938 was the year that Fannie Mae was created as a federal government agency and in 1968 the LBJ Administration along with a Democratically controlled Congress, decided to pass Legislation to privatize Fannie Mae and the S&L's were required to purchase shares as a condition of off loading their 30 year (PREPAYABLE at anytime) Fixed Rate Mortgages on an ongoing basis.

In 1968, it became an IMPLICIT government guarantee on the 30 year PREPAYABLE Fixed Rate Mortgages that any financial intermediary (mostly S&L's) sold to Fannie Mae. The S&L's could unload from their balance sheet mortgages instead of waiting for up to 30 YEARS to get paid back from the mortgagor. This freed up the S&L's to loan more mortgages to American Families.

In 1968, inflation (as now) was running rampant throughout the US Economy. The IMPLICIT (VERSUS EXPLICIT) GOVERNMENT GUARANTEE was chosen by Congress to AVOID KEEPING ALL THE CURRENT AND FUTURE MORTGAGES ON THE FEDERAL GOVERNMENT LIABILITIES BALANCE SHEET AS NOW THEY WOULD BE KEPT ON FANNIE MAE'S PRIVATE CORPORATION BALANCE SHEET.

Read ANY GSE MBS Legal Prospectus, what does it say in BOLD WORDS ON THE FRONT PAGE: THESE MORTGAGES ARE NOT INSURED OR GUARANTEED OBLIGATIONS OF THE FEDERAL GOVERNMENT.

Freddie Mac was chartered in 1970 to offer competition to Fannie Mae.