How Fannie Mae Shaped—and Complicated—US Homeownership

For more than eight decades, Fannie Mae has weathered presidential administrations, political upheavals, housing booms and market busts. The mortgage financing giant—formally known as the Federal National Mortgage Association, or FNMA—remains a cornerstone of the American housing system.

Created in 1938 as part of Franklin D. Roosevelt’s New Deal, Fannie Mae helped expand access to homeownership and shape ideals of the American Dream. Over the years, it survived 1960s privatization efforts and the monumental housing crisis of the 2008 Great Recession.

In the depths of the Great Depression, President Roosevelt was searching for ways to stimulate the economy. More housing construction could help create jobs, but the average American still couldn’t get a home loan, especially as bank runs and busts continued to plague the country. The American mortgage market was fragmented and unstable. Most home loans required large down payments and came due within just five years. 

A 1938 amendment to the National Housing Act created the Federal National Mortgage Association (FNMA) as a federal agency to make getting a home loan easier. The program, which became known as Fannie Mae from its acronym, built on the government-backed mortgages introduced by the Federal Housing Administration four years earlier. By purchasing federally backed loans from private lenders, Fannie Mae gave banks more cash to issue new mortgages and expand the housing market. In turn, banks bought securities and bonds collateralized by those same mortgages.

“In 1938, it was not a big deal at the time,” says James R. Hagerty, a reporter for The Wall Street Journal and author of The Fateful History of Fannie Mae: New Deal Birth to Mortgage Crisis Fall. “It was barely reported in the newspapers. The Wall Street Journal had a story that was eight sentences long to discuss this.” 

Over the following decades, the model became deeply embedded in the American economy. By the 1960s, the 30-year mortgage had emerged as the dominant way to buy a home in the United States.

Still, Fannie Mae’s role was far from universally accepted. Throughout the 1940s and 1950s, Congress debated over whether Fannie Mae should even exist. Some argued such an entity wasn’t necessary in a free-market economy; others pointed out how many Americans were able to finance their homeownership dreams via these loans. 

“Any time there was any discussion of weakening Fannie Mae, realtors and homebuilders would rush into Congress and say, ‘Damn right we need them! It’s the American dream! How dare you question them!’” Hagerty says. 

In 1953, President Dwight D. Eisenhower spoke publicly about eliminating Fannie Mae, but the turning point didn’t come until 1968, when the federal budget came under scrutiny.

Fannie Mae officially split from the federal government under the Housing and Urban Development Act of 1968. It became a privately held corporation—crucially one that wasn’t a line item on the federal budget.

Fannie Mae went from a government agency to a shareholder-owned corporation with a congressional charter. This split also created Freddie Mac (the Federal Home Loan Mortgage Corporation) and Ginnie Mae (the Government National Mortgage Association) to foster competition. 

But these mortgage giants all held government charters and still played a big role in promoting policies that supported homeownership. “It was a hybrid,” Hagerty says. “It was going to look and feel like a government agency even though it wouldn’t be anymore, and no one thought at that time about the contradiction: having this public policy role but having private shareholders.” 

Over the next few decades, Fannie Mae remained a central force in housing finance, buying and securitizing trillions in conventional mortgages. It fueled rising homeownership and, eventually, excessive risk-taking.

As the housing bubble ballooned, the subprime mortgage crisis loomed on the horizon. By the early 2000s, confidence in Fannie Mae’s bonds remained strong because investors widely believed the government would guarantee its debts—even as a private company, Hagerty says.

“At that point, we began to play the dual role of darling of Wall Street, but we also had this beautiful red-white-and-blue mission statement,” says Susan Wharton Gates, author of Days of Slaughter: The Fall of Freddie Mac and Why It Could Happen Again. “The famous line is, ‘We were privatizing the profits and socializing the losses.’ That is exactly what happened when we fell apart.” 

When the housing bubble finally burst, Fannie Mae and Freddie Mac’s value went into free fall. In 2008, the government spent nearly $200 billion to bail out both agencies, though some calculate the total costs closer to $1 trillion. To stem the bleeding amid the Great Recession, the government retook control of Fannie Mae and Freddie Mac in a conservatorship, folding them under the Federal Housing Finance Agency. 

Shares of Fannie Mae and Freddie Mac don’t trade publicly, but Fannie Mae managed to return to profitability by 2012. Shares of both agencies reached pre-2008 levels in 2025.

“There is no other major country that has anything like this,” Hagerty says.  “We think it’s necessary because we have had it for a long time and it’s such a big part of the housing market.” 

The idea of homeownership has remained such a cornerstone of our public concept of the American Dream, Gates says. “Compared to Europe, that idea of frontier and ‘your own land’ and ‘your autonomy’—it goes with that American spirit of independence,” she adds. “That captures the American imagination.”