End of Fannie and Freddie? Bill aims to strip federal backing

Proposal would draw financing from user-generated fees rather than tax dollars

New York /
Mar.March 13, 2014 12:07 PM

Fannie Mae and Freddie Mac may soon cease to exist, should legislation introduced by the Senate banking committee Tuesday pass.

Private capital would have to take the first 10 percent of mortgage losses under the proposed bill, which would remove much of the federal backing that repackaged mortgage-backed securities have enjoyed since Fannie and Freddie were placed into government conservatorship five years ago. The move would form a Federal Mortgage Insurance Corp. functioning similarly to the Federal Deposit Insurance Corp., which would ensure that financing remains accessible to qualified buyers. User fees would generate funds, rather than tax dollars.

The change aims to ultimately dissolve Fannie and Freddie completely, according to a statement from Idaho Senator Mike Crapo released Tuesday morning.

“Government control of Fannie and Freddie with no private capital to protect taxpayers against losses is unacceptable,” Crapo said in the press release, adding that the form would “move us toward a stronger housing system that provides a balance between providing broad access to mortgages.”

The proposal caught several industry-watchers off guard, the New York Observer reported, with some saying the legislation would destabilize the multifamily sector.

“Today is a bad day,” Greenberg Traurig head Robert Ivanhoe told the Observer. “I am sure many people in the real estate industry are concerned about the winding down of the largest source of liquidity for multi-family apartment properties, by far, and how they will be financed in the future.” [NYO]Julie Strickland


Related Articles

arrow_forward_ios
From left: Fannie Mae's Hugh Frater and Freddie Mac's Michael DeVito
Government to back home loans over $1M
Government to back home loans over $1M
Residential Real Estate, Housing Market, Fannie Mae
Sentiment sinks deeper as market sidelines buyers and sellers
Sentiment sinks deeper as market sidelines buyers and sellers
Equifax CEO Mark Begor (Photo Illustration by Steven Dilakian for The Real Deal with Getty Images)
Equifax error might have harmed (or helped) mortgage applicants
Equifax error might have harmed (or helped) mortgage applicants
314 Wilson Avenue in Bushwick, Pennrose Holdings' Mark Dambly (Pennrose Holdings, Hope Gardens)
Pennrose, Acacia land $117M Freddie Mac loan in Bushwick
Pennrose, Acacia land $117M Freddie Mac loan in Bushwick
(iStock)
Mortgage rates falling back toward 5%
Mortgage rates falling back toward 5%
Fannie Mae's Doug Duncan (Fannie Mae, iStock)
Optimism continues slide among would-be homebuyers
Optimism continues slide among would-be homebuyers
A photo illustration of a crystal ball predicting future home prices (iStock)
Home sales, building to slow: Fannie Mae
Home sales, building to slow: Fannie Mae
(iStock/Illustration by Kevin Rebong for The Real Deal)
Existing-home sales leapt 6.7% in January
Existing-home sales leapt 6.7% in January
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...