Mortgage Backed Securities

The Federal National Mortgage Association (Fannie Mae) was set up in 1948 by the government to encourage home ownership in the United States. Fannie Mae supported saving and loans banks (S&Ls) 7 in the USA, by buying mortgages which local (but federally chartered) S&Ls could not fund through deposits. In 1968, the organisation was split into Fannie Mae and Ginnie Mae (the Government National Mortgage Corporation). Government National Mortgage Corporation  is a wholly owned corporation of US government departments. It claims to have introduced the first mortgage backed security (MBS) in 1970. Though shareholder-owned, Fannie Mae is a US government-related agency, along with Freddie Mac (the Federal Home Loan Mortgage Corporation), also created in 1970. Their respective charters do not say the US government guarantees their debt but as government-sponsored enterprises, they can expect to be bailed out.

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