The White House on Thursday unveiled a plan to release Fannie Mae and Freddie Mac from government control and turn them into private companies.
Under the proposal, which still needs congressional approval, the two mortgage giants would lose their federal charters. Other private companies would be able to compete with them in the business of repackaging mortgages, stamping them with a repayment guarantee and selling them off to investors in the form of bonds, Bloomberg reported.
The federal government would oversee Fannie, Freddie and its competitors, but only guarantee repayment on mortgage-backed securities in “limited, exigent circumstances.” Fannie and Freddie are currently under government conservatorship.
The Mortgage Bankers Association issued a statement welcoming the proposal.
“It includes many core principles that MBA has long advocated for, such as an explicit government guarantee on MBS only as a catastrophic backstop, allowing for multiple guarantors and ensuring small lender access,” said the trade group’s CEO David Stevens. [Bloomberg] — Konrad Putzier