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Future of Fannie and Freddie

By Judy Martel · Bankrate.com
Tuesday, March 5, 2013
Posted: 3 pm ET

The troubled, government-controlled mortgage finance companies Fannie Mae and Freddie Mac will continue to shrink their monopoly by forming a joint firm to securitize mortgages.

The new firm could develop into a private mortgage company or become part of the government, according to Edward DeMarco, acting director of the Federal Housing Finance Agency, which oversees Fannie and Freddie. "The overarching goal is to create something of value that could either be sold or used by policymakers as a foundational element of the mortgage market of the future," he said in remarks published in Reuters.

Fannie and Freddie, which were bailed out by taxpayers in 2008, finance approximately two-thirds of mortgages, but the government wants to reduce further risk to taxpayers and get out of the mortgage business. To date, the U.S. Treasury has provided approximately $190 million to make up for failed home loans that were backed by Fannie and Freddie.

The new firm will securitize home loans as one entity instead of two and will be owned by Fannie and Freddie, DeMarco said. He added that he expects its future as a public entity or private firm will be decided by the government at a later date.

In a press conference, DeMarco said the new firm won't begin securitizing loans next year, but in the meantime, he plans to continue to reduce Fannie and Freddie's business through a 10 percent reduction in multifamily-house loans this year.

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2 Comments
Jaime
March 07, 2013 at 10:31 pm

big wow