The Trump Effect
The new Donald Trump administration might tackle the fate of mortgage giants Fannie Mae and Freddie Mac. The government-sponsored enterprises have been under conservatorship since autumn 2008. In effect, they are managed by a federal agency.
The conservatorship of Fannie and Freddie was supposed to be temporary, but policymakers haven't figured out what to do about the companies. Congressional conservatives favor abolishing them. Wall Street and many people in the mortgage industry favor privatizing them.
Steven Mnuchin, the nominee to be Treasury secretary under Trump, says privatizing Fannie and Freddie will be a top priority. "It makes no sense that these are owned by the government and have been controlled by the government for as long as they have," Mnuchin told Fox Business.
Rick Roque, president of MenloFinancial, a bank consulting firm, is heartened by Mnuchin's words.
"Privatizing Fannie and Freddie will infuse those organizations with more capital, which will enable them to purchase greater volumes of mortgages from lenders," Roque says. "So that should have the effect of lowering interest rates, or at least keep them from going higher."
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