Headquartered in America, Fannie Mae is an organization established more than 70 years ago. It is a government sponsored company which ensures that the wealth of America is on a constant circulation amongst American families. It ensures the flow of funds in to the mortgage market so that American residents may enjoy a luxurious home which they can afford overtime, by accessing the mortgage credit.
Fannie Mae Strengths
Since Fannie Mae is a very old business institution, it has gained nationwide recognition and this is perhaps its greatest strength. This company has received the honor of being the second-largest financial organization in US and had once controlled 25 percent of the total housing mortgages in America. The company is far too strong, with a reported share holders’ equity increase, up to $8 billions (New York Times, 2004-04-16). The financial position and internal management of Fannie Mae Company enhanced after she took an initiative to improve accounting procedures after the 2004 scandal. [sky]
Fannie Mae, being a government supported enterprise is entitled to receive a huge amount of subsidy annually and reduction in local and registration taxes. It is therefore very easy for the company to access market capital and thus, it has a greater scope for future development.
Fannie Mae Weaknesses
Home prices in American are falling down drastically and this has leaded the ‘Fannie Mae’ business in to extreme losses. In the start of the year, the property of Fannie Mae had a net estimated value of 35.8 billions that declined 66 percent becoming 12.2 billions in December. A report says that because of the home prices issue, the company had to face a loss of 2.2 Million in the first quarter.
Also, Fannie Mae is one of the largest mortgage providers, thereby it is very difficult to look over all the company’s possessions and debtors and it becomes cumbersome to manage all the affairs simultaneously (associated press, 2008-05-06)
Fannie Mae Opportunities
Rarely any business in America is willing to take such risks of mortgaging houses and providing loans to people. Thus Fannie Mae has a big advantage that it alone stands on the platforms with few competitors. One opportunity can be that it can undergo integration with the Freddie Mac Company, which is a staunch competitor of Fannie Mae in the same business. This may create a monopoly and benefit them and other shareholders with economies of scale, and will result in the creation of an efficient management with zonal divisions.
Since Fannie Mae has a governmental backup, it can use government help to establish their inspection offices at different locations within America to monitor those zones, so that none of the debtors goes off without paying the mortgage amount and this will result in less losses and more income.
Fannie Mae Threats
An economic downturn and recession has led the American finance into a very fragile position. Thereby, the Fannie Mae Company has lost a lot of investment. The threat can be serious if the economic recession causes a decline in the aggregate demand for Mortgage housing (Kerrie Panchuk, 2011-09-11)
Further more, Fannie Mae has decided to punish the debtors who fly away without paying the required amount for debt settlement. This has grown an over all fear in the mortgage owners and in future criticism may lead the company into a bad position. [linkunit]
On an overall glance, the company is providing excellent services to the people who require mortgages in America and has supreme backing by the government. It is a company which dared to take such risk and proceed with it. It has bright future plans, and if implemented in the right way, may be able to prosper in future.