September 6, 2019
A plan to end government control of Fannie Mae and Freddie Mac was unveiled by the Treasury Department on Thursday. The move to privatize the two giant mortgage finance companies is envisioned as a way to reduce taxpayer risk. The White House administration had asked for a plan earlier this year.
The companies nearly collapsed in the financial crisis 11 years ago, though were subsequently rescued, receiving more than $190 billion from the Treasury Department. Under the new plan, the companies would be privately-owned yet government “sponsored” companies again.
The Treasury Housing Reform Plan includes nearly 50 recommended legislative and administrative reforms to define a limited role for the Federal Government in the housing finance system, enhance taxpayer protections against future bailouts, and promote competition in the housing finance system.
Profits would be used to shore up Fannie and Freddie’s capital bases as a cushion against possible future losses, rather than going to the Treasury. The proposed reform of the housing finance system plan would also preserve a staple of housing finance: 30-year, fixed-rate mortgages.
The companies serve a vital role in the housing market and have played a key part in the multifamily sector. Together, they guarantee roughly half of the $10 trillion U.S. home loan market.
Fannie and Freddie currently operate under government conservatorships and have returned to profitability since the 2008 crisis, having repaid in full what they owed the Treasury.
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