Q:

What are Fannie Mae foreclosures?

A:

Quick Answer

Fannie Mae foreclosures are properties that the mortgage agency seized from homeowners who defaulted on their payments, explains HUDForeclosed.com. The Federal National Mortgage Association, known as Fannie Mae, is not a direct lender; however, the agency does purchase mortgage loans from direct lenders.

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Full Answer

As of 2015, Fannie Mae owns over half of all mortgage loans in the United States, according to HUDForeclosed.com. Since Fannie Mae purchases mortgage loans from direct lenders, the agency holds the rights to the loans and the properties backing the loans. Therefore, when borrowers default on their mortgage payments, Fannie Mae holds the rights to foreclose on the properties.

Fannie Mae’s primary purpose is to promote homeownership and make financing affordable for low- to moderate-income Americans, states Investopedia. Fannie Mae and its “little brother” Freddie Mac guarantee 40 to 60 percent of all mortgage loans in the United States as of 2015. The two agencies purchase mortgage loans then securitize them into mortgage-backed securities. Investors purchase the loans from the two agencies to make a profit on the interest payments on the loans. Some of Fannie Mae’s largest investors include pension funds, hedge funds, insurance companies and foreign governments. Investors who purchase mortgage-backed securities from Fannie Mae consider the market large and liquid.

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