NCPA - National Center for Policy Analysis

White House Will Proposing Phasing Out of Fannie Mae and Freddie Mac

February 11, 2011

More than two years after the government seized Fannie Mae and Freddie Mac, the Obama administration will recommend phasing out the housing-finance giants and gradually reducing the government's footprint in the mortgage market, says the Wall Street Journal.

  • The administration is expected to include three options for a post-Fannie and Freddie world when it releases a long-awaited proposal for the future of the nation's $10.6 trillion mortgage market.
  • Together with federal agencies, Fannie and Freddie have accounted for nine of 10 new loan originations in the past year.

The administration's proposal to Congress is likely to assess the merits and drawbacks of each of the three options.  The most conservative option would propose no government role in the mortgage market beyond existing federal agencies, such as the Federal Housing Administration.  The two others would create a way for the government to backstop part of the secondary mortgage market, a role long filled by Fannie and Freddie.  Under one, that government backstop would kick in primarily during periods of market stress; under the other, the government would play a role at all times, says the Journal.

Source: Nick Timiraos, "White House Plans to Revamp Mortgage Market," Wall Street Journal, February 9, 2011.


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