In 1938, President Franklin D. Roosevelt established Fannie Mae to encourage the flow of credit to homebuyers, homebuilders, and financial institutions, 7 just four years after the Federal Housing Administration (FHA) had been established. 8 Prior to the FHA, down payment requirements were large, oftentimes more than 50 percent; repayment schedules were short, typically five years; and balloon payments at the end of the loan term were also large. 9 Thus, the establishment of Fannie Mae and FHA made homeownership affordable for millions of US households. 10

Three decades later, in 1968, Congress split Fannie Mae into two units: One that bought governmentissued loans and would remain a government entity, called Ginnie Mae, 11 and one that became the privatized Fannie Mae, from then on owned by stockholders, although its public mission continued. 12 Congress had become concerned about Fannie Mae’s increased debt, and thus a potential government liability, and about increasing interest rates and thus a decrease in housing construction and housing finance activity. 13