Republican unveils plan to privatize Fannie, Freddie
As housing reform moves into focus on Capitol Hill, one prominent Republican unveiled a proposal that aims to privatize mortgage giants Fannie Me and Freddie Mac.
Senate Banking Committee Chairman Mike Crapo, R-Idaho, released a three-page outline on Friday, about a decade after Fannie and Freddie came under government oversight.
“We must expeditiously fix our flawed housing finance system,” Crapo said in a statement. “My priorities are to establish stronger levels of taxpayer protection, preserve the 30-year fixed rate mortgage, increase competition among mortgage guarantors, and promote access to affordable housing."
Treasury Secretary Steven Mnuchin called the proposal a “productive first step” toward reform, as reported by Bloomberg. Prior efforts to overhaul the housing system have failed.
Shares of Fannie and Freddie rose following the release of the proposal but remain at depressed levels.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| FNMA | FEDERAL NATIONAL MORTGAGE ASSOCIATION | 8.51 | -1.19 | -12.27% |
| FMCC | FEDERAL HOME LOAN MORTGAGE CORP. | 7.68 | -1.12 | -12.73% |
After reports surfaced in January indicating the White House was looking to end federal oversight of the mortgage giants as soon as this month, potentially acting without Congress, the administration said this week it would work with lawmakers to develop a reform plan.
A White House spokesperson said proposed changes will be made public “shortly,” and no final decisions have been made as to what will be included in the new framework.
Fannie and Freddie have been operating within the government since being bailed out for nearly $200 billion at the height of the financial crisis.
The two government-sponsored enterprises do not originate loans – instead they purchase and guarantee them on the secondary market.
Privatizing the entities has been a longtime goal of Mnuchin, who told FOX Business in November 2016 that the administration had to “get them out of government control.”
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“It makes no sense that these are owned by the government and have been controlled by the government for as long as they have,” he said, promising at the time to execute the separation “reasonably fast.”
Taking Fannie Mae and Freddie Mac out from under government control could be a boon to shareholders – who have essentially had shares wiped out. As of 2012, profits from Fannie and Freddie have been redirected to the U.S. Treasury.