Fannie Mae History: Founding, Growth & Key Milestones

The birth of Fannie Mae was forged in the catastrophic housing collapse of the Great Depression. In the early 1930s, American home financing was fundamentally flawed: mortgages were short-term balloon loans lasting three to five years, requiring borrowers to make massive lump-sum principal payments or refinance at the whim of local banks. When the banking system collapsed in 1932, lenders demanded immediate payment, triggering foreclosure on millions of American family homes. In response, President Franklin D. Roosevelt's New Deal administration established the Federal Housing Administration (FHA) in 1934 to insure long-term, amortizing mortgages. However, private banks still refused to hold 20- or 30-year loans due to illiquidity. On February 10, 1938, President Roosevelt signed legislation chartering the National Mortgage Association of Washington (renamed the Federal National Mortgage Association, or Fannie Mae) as a government agency to purchase FHA-insured loans from local banks, injecting fresh cash into lenders so they could issue new mortgages. In 1968, to remove Fannie Mae's growing mortgage debt from the federal budget during the Vietnam War, President Lyndon B. Johnson signed the Housing and Urban Development Act, dividing the agency: Government National Mortgage Association (Ginnie Mae) remained a federal agency to handle government-backed loans, while Fannie Mae was rechartered as a publicly traded, shareholder-owned Government-Sponsored Enterprise (GSE). In 1981, Fannie Mae issued its very first conventional Mortgage-Backed Security (MBS), democratizing institutional global capital for American homeownership. In September 2008, following catastrophic default losses on Alt-A and subprime loans, the FHFA placed Fannie Mae into federal conservatorship, where it remains today under a Senior Preferred Stock Purchase Agreement with the US Treasury.