Fannie Mae Early History
The FHA Administrator chartered Fannie
Mae on February 10, 1938. The impetus for creation of Fannie Mae was
twofold: the national commitment to housing and the inability or unwillingness
of private lenders to ensure a reliable supply of mortgage credit
throughout the country. The primary purpose of Fannie Mae was to purchase,
hold, or sell FHA-insured mortgage loans that had been originated
by private lenders. After World War II, Fannie Mae's authority was
expanded to include VA-guaranteed home mortgages.
1954 Charter Act
The Charter Act of 1954 provided the
basic framework under which Fannie Mae operates today but did not
remove it from direct federal control. The act removed government
backing for borrowings used to fund Fannie Mae's secondary market
operations. It stipulated that Fannie Mae be exempt from all local
taxes except property taxes, and provided for the Federal Reserve
Banks to perform various services for Fannie Mae.
Also defined the path by which Fannie
Mae's secondary market operations would be transferred to the private
sector: proceeds from gradual sales of common stock were to be used
to retire Treasury-owned preferred stock in Fannie Mae.
1968 Charter Act
The 1968 Charter Act split Fannie Mae
into two parts: Ginnie Mae and a reconstituted
Fannie Mae. Ginnie Mae would continue as a federal agency and be responsible
for the then-existing special assistance programs, and Fannie Mae
would be transformed into a "government-sponsored private corporation"
responsible for the self-supporting secondary market operations. The
reconstituted Fannie Mae was to be stockholder-owned and managed.
Fannie Mae retired the last of its government stock on September 30,
1968, and transformation to a government-sponsored private corporation
was completed in 1970.
The 1968 Act provided the authority
to issue Mortgage-Backed Securities (MBS).
The Act also established a regulatory
structure to ensure Fannie Mae's adherence to its public purpose.
It provided for continuing HUD oversight of Fannie Mae, granting "general
regulatory power ... to insure that the purposes of this Title are
Emergency Home Finance Act of 1970
The Emergency Home Finance Act of 1970
created Freddie Mac and authorized it
to create a secondary market for conventional mortgages. Parallel
authority and limitations to deal in conventional mortgages were given
to Fannie Mae.
To alleviate credit concerns raised
by acquisition of conventional mortgages (that lack federal backing),
several eligibility restrictions and/or risk sharing requirements
were imposed on the mortgages Fannie Mae could buy.
The new law also required the HUD
Secretary to provide prior approval of Fannie Mae's "purchase"
or "dealing in" conventional mortgages (later interpreted
by HUD regulations in 1995 to require specific approval of new and
different conventional "programs").
Secondary Mortgage Market Enhancement
Act of 1984
The Secondary Mortgage Market Enhancement Act of 1984 ("SMMEA")
clarified and modified several of HUD's regulatory powers over Fannie
Mae. It required HUD to respond within 45 days to any request for
new program approval made by Fannie Mae under the Charter Act (with
a 15-day extension permitted) and authorized Fannie Mae to purchase
and deal in subordinate lien mortgages.
Financial Institutions Reform, Recovery,
and Enforcement Act of 1989
The Financial Institutions Reform, Recovery,
and Enforcement Act ("FIRREA") of 1989 made regulation of
Fannie Mae and Freddie Mac consistent. Until 1989, Freddie
Mac was owned by the Federal Home Loan Bank System and its member
thrifts and governed by the Federal Home Loan Bank Board (later reorganized
into the Office of Thrift Supervision). FIRREA severed Freddie Mac's
ties to the Federal Home Loan Bank System, created an 18-member board
of directors to run Freddie Mac, and subjected it to HUD oversight.
Also, the GAO and Treasury were instructed
to conduct studies of Fannie Mae, Freddie Mac, and the Federal Home
Loan Banks. These studies laid the foundation for comprehensive regulatory
modernization for both Fannie Mae and Freddie Mac in 1992.
The Federal Housing Enterprises Financial
Safety and Soundness Act of 1992
The Federal Housing Enterprises Financial
Safety and Soundness Act ("FHEFSSA") of 1992 modernized
the regulatory oversight of Fannie Mae and Freddie Mac. It created
the Office of Federal Housing Enterprise Oversight ("OFHEO")
as a new regulatory office within HUD with the responsibility to "ensure
that Fannie Mae and Freddie Mac are adequately capitalized and operating
safely." OFHEO is funded by assessments on Fannie Mae and Freddie
Mac and is authorized to act without HUD oversight
on a range of regulatory issues enumerated in the statute. FHEFSSA
established risk-based and minimum capital standards for Fannie Mae
and Freddie Mac. And, it established HUD-imposed housing goals for
financing of affordable housing and housing in central cities and
other rural and under served areas.