The way forward for Fannie, Freddie
The Federal Housing Finance Agency (FHFA) today sent a strategic plan to Congress regarding Fannie Mae and Freddie Mac over whom they are the conservators, in an effort to guide mortgage lending toward the private sector and away from government control. The plan is in response to a lack of action by Congress and in response to various FHFA investigations into various bad behaviors of Fannie and Freddie.
Over the last year, the organization has been creating this plan which they have alluded to at several press conferences, and it is meant to be a stopgap measure until Congress and the White House can come together on creating a meaningful way forward for housing finance. DeMarco tells Reuters, “Conservatorship is not meant to go on forever. Ultimately, we are going to need congressional action to conclude the conservatorship.”
Three goals outlined by FHFA:
FHFA aims to create a single mortgage securitization platform, replacing current systems used by Fannie and Freddie, a measure which would take substantial time to implement.
The second goal of the FHFA is to reduce the role of Fannie Mae and Freddie Mac in housing overall, in an effort to stimulate private sector participation.
The third goal is to continue pushing foreclosure prevention efforts and credit availability. The organization says that “the work begun three years ago is not finished. Programs and strategies to ensure ongoing mortgage credit availability, assist troubled homeowners, and minimize taxpayer losses while restoring stability to housing markets continue to require energy, focus, and resources.”
The FHFA notes that “Fannie Mae and Freddie Mac were chartered by Congress and by law, only Congress can abolish or modify those charters and set forth a vision for a new secondary market structure.”
The report adds that “This plan envisions actions by the Enterprises that will help establish a new secondary mortgage market, while leaving open all options for Congress and the Administration regarding the resolution of the conservatorships and the degree of government involvement in supporting the secondary mortgage market in the future.”