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White House Proposes Privatization of Fannie, Freddie
A proposal by the Trump Administration would remove Fannie Mae and Freddie Mac’s federal charters. Privatizing the mortgage companies, which have been under U.S. conservatorship since 2008, is part of a sweeping government reorganization plan.
The change could allow competitors to challenge the dominant market position the pair of Government Sponsored Entities (GSE) now hold. The GSE’s purchase loans from lenders, and create securities by bundling them together for sale. If the loans default, they are guaranteed. During the 2008 financial crisis, Fannie and Freddie received $187.5 billion in bailout money from federal regulators, which has since been repaid.
Congress and policy-makers argue that the companies should be replaced with a system where taxpayers aren’t responsible for losses.
The MBA supports the proposed change because it has an explicit government guarantee on MBS only as a catastrophic backstop. Though others, such as the National Community Reinvestment Coalition, oppose it because it lacks an affordable-housing mandate.
For comments, questions or concerns, please contact Dennis Kaiser
- ◦Financing
