White House Proposes Plan to Privatize Fannie and Freddie

Posted by Amrock

The White House has unveiled plans to dramatically reshape the U.S. housing finance system, including privatizing government-sponsored enterprise (GSE) lenders Fannie Mae and Freddie Mac. The proposal would also end the government conservatorship of the GSEs, which was enacted almost 10 years ago during the height of the housing crisis. The plan, titled “Reform Federal Role in Mortgage Finance,” is part of a larger proposal to overhaul parts of the federal government.

GSE mortgage share at 70 percent in 2017

According to the article, the Trump Administration claims GSE lenders play an outsized role in the U.S. mortgage finance system, impeding other market competition. The plan states that home loans backed by either Fannie Mae, Freddie Mac or Ginnie Mae, which guarantees home loans by the Federal Housing Administration (FHA), the Department of Veterans Affairs (VA) and the Department of Agriculture (USDA), together accounted for nearly 70 percent of all mortgages originated in 2017.

Current system has “structural flaws”

“Although the Federal role in the housing market has helped to facilitate the availability of the 30-year fixed-rate mortgage, the current system has structural flaws that have also created distortions in home pricing that may actually hinder the goal of home ownership,” the proposal stated.

The article reported that the plan hopes to implement changes to increase competition in the mortgage market, while minimizing risk to taxpayers and ensuring mortgage credit continues to be available for creditworthy borrowers in times of “market stress.”