song . for the chicago based confectionery see fannie may . federal national mortgage association fannie mae fannie mae headquarters at 3900 wisconsin avenue nw in washington d.c. type government sponsored enterprise and public company traded as otcqb fnma industry financial services founded 1938 ; 78 years ago 1938 headquarters washington d.c. u.s. key people tim mayopoulos ceo products diversified investments revenue us 25.8 billion 2014 1 net income us 14.2 billion 2014 1 total assets us 3.248 trillion 2014 1 total equity us 3.7 billion 2014 1 number of employees 7 200 2013 website www.fanniemae.com the federal national mortgage association fnma commonly known as fannie mae is a government sponsored enterprise gse and since 1968 a publicly traded company . founded in 1938 during the great depression as part of the new deal 2 the corporation s purpose is to expand the secondary mortgage market by securitizing mortgages in the form of mortgage backed securities mbs 3 allowing lenders to reinvest their assets into more lending and in effect increasing the number of lenders in the mortgage market by reducing the reliance on locally based savings and loan associations or thrifts . 4 its brother organization is the federal home loan mortgage corporation fhlmc better known as freddie mac . contents 1 history 1.1 1990s 1.2 2000s 1.3 the mortgage crisis from late 2007 1.4 2008 crisis and conservatorship 1.5 2010 delisting 1.6 2013 59.39 billion dividend 1.7 2014 134.5 billion dividend paid 2 business 2.1 business mechanism 2.2 conforming loans 2.3 implicit guarantee and government support 2.4 accounting 3 controversies 3.1 accounting controversy 3.2 conflict of interest 4 2011 sec charges 5 2011 lawsuits 6 2013 allegations of kickbacks 7 related legislation 8 2015 ruling 9 leadership 10 see also 11 references 12 external links history edit a view from the southwest of the federal national mortgage association s fannie mae s reston virginia facility . the great depression wrought havoc on the u.s. housing market . by 1933 an estimated 20 25 % of the nation s outstanding mortgage debt was in default . 5 fannie mae was established in 1938 by amendments to the national housing act 6 as part of franklin delano roosevelt s new deal . originally chartered as the national mortgage association of washington the organization s explicit purpose was to provide local banks with federal money to finance home mortgages in an attempt to raise levels of home ownership and the availability of affordable housing . 7 fannie mae created a liquid secondary mortgage market and thereby made it possible for banks and other loan originators to issue more housing loans primarily by buying federal housing administration fha insured mortgages . 8 for the first thirty years following its inception fannie mae held a monopoly over the secondary mortgage market . 7 other considerations may have motivated the new deal focus on the housing market about a third of the nation s unemployed were in the building trade and the government had a vested interest in getting them back to work by giving them homes to build . 9 fannie mae was acquired by the housing and home finance agency from the federal loan agency as a constituent unit in 1950 . 10 in 1954 an amendment known as the federal national mortgage association charter act 11 made fannie mae into mixed ownership corporation meaning that federal government held the preferred stock while private investors held the common stock ; 6 in 1968 it converted to a privately held corporation to remove its activity and debt from the federal budget . 12 in the 1968 change arising from the housing and urban development act of 1968 fannie mae s predecessor also called fannie mae was split into the current fannie mae and the government national mortgage association ginnie mae . ginnie mae which remained a government organization supports fha insured mortgages as well as veterans administration va and farmers home administration fmha insured mortgages . as such ginnie mae is the only home loan agency explicitly backed by the full faith and credit of the united states government . 13 in 1970 the federal government authorized fannie mae to purchase conventional mortgages the same year it went public on new york and pacific exchanges residential mortgage loan origination 2nd edition pg .8 j.keith baker 2010 i.e. those not insured by the fha va or fmha and created the federal home loan mortgage corporation fhlmc colloquially known as freddie mac to compete with fannie mae and thus facilitate a more robust and efficient secondary mortgage market . 13 in 1981 fannie mae issued its first mortgage passthrough and called it a mortgage backed security . the fannie mae laws did not require the banks to hand out subprime loans in any way . 14 ginnie mae had guaranteed the first mortgage passthrough security of an approved lender in 1968 15 and in 1971 freddie mac issued its first mortgage passthrough called a participation certificate composed primarily of private mortgages . 15 1990s edit in 1992 president george h.w. bush signed the housing and community development act of 1992 . 16 the act amended the charter of fannie mae and freddie mac to reflect the democratic congress view that the gses have an affirmative obligation to facilitate the financing of affordable housing for low and moderate income families in a manner consistent with their overall public purposes while maintaining a strong financial condition and a reasonable economic return ; 17 for the first time the gses were required to meet affordable housing goals set annually by the department of housing and urban development hud and approved by congress . the initial annual goal for low income and moderate income mortgage purchases for each gse was 30 % of the total number of dwelling units financed by mortgage purchases 18 and increased to 55 % by 2007 . in 1999 fannie mae came under pressure from the clinton administration to expand mortgage loans to low and moderate income borrowers by increasing the ratios of their loan portfolios in distressed inner city areas designated in the community reinvestment act cra of 1977 . 19 additionally institutions in the primary mortgage market pressed fannie mae to ease credit requirements on the mortgages it was willing to purchase enabling them to make loans to subprime borrowers at interest rates higher than conventional loans . 19 in 1999 the new york times reported that with the corporation s move towards the subprime market fannie mae is taking on significantly more risk which may not pose any difficulties during flush economic times . but the government subsidized corporation may run into trouble in an economic downturn prompting a government rescue similar to that of the savings and loan industry in the 1980s . 20 2000s edit franklin raines earned 90 million in salary and bonuses while he was head of fannie mae . 21 in 2000 because of a re assessment of the housing market by hud anti predatory lending rules were put into place that disallowed risky high cost loans from being credited toward affordable housing goals . in 2004 these rules were dropped and high risk loans were again counted toward affordable housing goals . 22 the intent was that fannie mae s enforcement of the underwriting standards they maintained for standard conforming mortgages would also provide safe and stable means of lending to buyers who did not have prime credit . as daniel mudd then president and ceo of fannie mae testified in 2007 instead the agency s underwriting requirements drove business into the arms of the private mortgage industry who marketed aggressive products without regard to future consequences we also set conservative underwriting standards for loans we finance to ensure the homebuyers can afford their loans over the long term . we sought to bring the standards we apply to the prime space to the subprime market with our industry partners primarily to expand our services to underserved families . unfortunately fannie mae quality safe loans in the subprime market did not become the standard and the lending market moved away from us . borrowers were offered a range of loans that layered teaser rates interest only negative amortization and payment options and low documentation requirements on top of floating rate loans . in early 2005 we began sounding our concerns about this layered risk lending . for example tom lund the head of our single family mortgage business publicly stated one of the things we don t feel good about right now as we look into this marketplace is more homebuyers being put into programs that have more risk . those products are for more sophisticated buyers . does it make sense for borrowers to take on risk they may not be aware of are we setting them up for failure as a result we gave up significant market share to our competitors . 23 alex berenson of the new york times reported in 2003 that fannie mae s risk is much larger than is commonly held . 24 nassim taleb wrote in the black swan the government sponsored institution fannie mae when i look at its risks seems to be sitting on a barrel of dynamite vulnerable to the slightest hiccup . but not to worry their large staff of scientists deem these events unlikely . 25 on january 26 2005 the federal housing enterprise regulatory reform act of 2005 s. 190 was first introduced in the senate by sen. chuck hagel . 26 the senate legislation was an effort to reform the existing gse regulatory structure in light of the recent accounting problems and questionable management actions leading to considerable income restatements by the gse s. after being reported favorably by the senate s committee on banking housing and urban affairs in july 2005 the bill was never considered by the full senate for a vote . 27 sen. john mccain s decision to become a cosponsor of s. 190 almost a year later in 2006 was the last action taken regarding sen. hagel s bill in spite of developments since clearing the senate committee . sen. mccain pointed out that fannie mae s regulator reported that profits were illusions deliberately and systematically created by the company s senior management in his floor statement giving support to s. 190 . 28 29 at the same time the house also introduced similar legislation the federal housing finance reform act of 2005 h.r. 1461 in the spring of 2005 . the house financial services committee had crafted changes and produced a committee report by july 2005 to the legislation . it was passed by the house in october in spite of president bush s statement of policy opposed to the house version which stated the regulatory regime envisioned by h.r. 1461 is considerably weaker than that which governs other large complex financial institutions . 30 the legislation met with opposition from both democrats and republicans at that point and the senate never took up the house passed version for consideration after that . 31 the mortgage crisis from late 2007 edit following their mission to meet federal housing and urban development hud housing goals gses such as fannie mae freddie mac and the federal home loan banks fhlbanks had striven to improve home ownership of low and middle income families underserved areas and generally through special affordable methods such as the ability to obtain a 30 year fixed rate mortgage with a low down payment ... and the continuous availability of mortgage credit under a wide range of economic conditions . 32 then in 2003 2004 the subprime mortgage crisis began . 33 the market shifted away from regulated gse s and radically toward mortgage backed securities mbs issued by unregulated private label securitization conduits typically operated by investment banks . as mortgage originators began to distribute more and more of their loans through private label mbs s gse s lost the ability to monitor