Real Estate Glossary > F > Fannie Mae Definition

The Federal National Mortgage Association (FNMA), usually known as Fannie Mae, is a private company and government-sponsored entity that buys loans from mortgage lenders, packages them together and sells them to outside investors to make sure the lenders have funds to continue buying loans. This increases the flexibility and liquidity of the mortgage market. A similar entity called Freddie Mac has a nearly identical structure and function. Because Fannie and Freddie are willing to buy loans from lenders, they allow banks to loan money at rates that are .25% - 1.5% lower than what a home-buyer would otherwise pay. The loans that Fannie and Freddie are willing to support are called conforming loans because the loans conform to Fannie and Freddie's rules. The primary limit on the loans that Fannie and Freddie support is the loans' size. Beginning January 1, 2009, the national conforming-loan limit is $417,000 in most areas, and $625,500 in areas the government designates as high-priced. Loans that are too big to conform to Fannie and Freddie limits are also known as jumbo mortgages. In September 2008, the federal government took over Fannie and Freddie, which otherwise would have gone bankrupt.