Federal National Mortgage Association [FNMA] Law and Legal Definition

The Federal National Mortgage Association (FNMA) is a federal agency that was established by Congress in 1968. The FNMA is a stockholder-owned corporation and also a government sponsored enterprise. The main objective of the FNMA is to expand secondary mortgage market by securitizing mortgages. It also encourages lenders to reinvest their assets into more lending. The FNMA is also known as Fannie Mae. The FNMA is treated as an agent of or in privity with the U.S.[Green v. United States, 145 Ct. Cl. 628, 632 (Ct. Cl. 1959)].

The following are some characteristics of the FNMA:

1.The FNMA guarantees timely interest and principal payments;

2. FNMA pools tend to be larger than Government National Mortgage Association [GNMA] pools;

3.FNMA securities are not as marketable as GNMA securities; and

4. FNMA securities are higher than those offered by GNMA securities.