Teaching Case - Fannie Mae and its Affordable Housing Mandate: Private Sector Rules and Public Sector Expectations

Fannie Mae and its Affordable Housing Mandate: Private Sector Rules and Public Sector Expectations

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  • Product Description

    Abstract:
    The Federal National Mortgage Association is among the United States' most important government-sponsored enterprises (GSEs). Although a private, stockholder-help corporation, "Fannie Mae" is chartered by the federal government in ways which give it financial advantages in serving what is seen to be a socially-important function: purchasing home mortgages for resale in a "secondary market" so as, indirectly, to make the cost of buying a home less expensive. Fannie Mae's charter has not been a guaranty of profitability; interest rate fluctuations have, as in the last 1970s, led it to financial difficulties. Some in Congress, concerned about public liability for potential debts and not certain why indirect subsidies for home buying were necessary, have floated the idea of privatizing the mortgage securities giant. But by the early 1990s, with Fannie Mae having become solidly profitable, some of Fannie Mae's overseers--including its regulators in the Department of Housing and Urban Development--pushed for it to meet lending targets for poorer, urban neighborhoods and less affluent families. But Fannie Mae was not a bank; it made no loans directly to families. Company officials realized that, to increase the number of the kind of mortgages in which regulators were interested, it somehow had to simulate interest in homeownership among lower-income families--and a willingness, on the part of banks, to make loans to such families. This case describes strategies considered by Fannie Mae as it approached that marketing task. It provides a venue to discuss corporate strategic planning, as experienced by a government-sponsored firm, as well as corporate decision-making in a significantly-regulated environment.

  • Other Details

    Publication Date: January 01, 1996
    HKS Case Number: 1365.0
    Case Author: Pamela Varley
    Faculty Lead: William Apgar and Marty Linsky
    Pages (incl. exhibits): 11
    Setting: United States
    Language: English
    Funding Source: Fannie Mae Foundation
    _year: Older than 2000
    _pages: 1-15
    _geography: US & Canada
  • Warranty Information

    /review/1365.0.EducatorCopy.pdf

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