Trump admin moves to end conservatorship of Freddie, Fannie

President to sign official memorandum detailing the process for unwinding the mortgage guarantors
March 27, 2019 04:48PM

From left: Fannie Mae CEO Hugh R. Frater, President Donald Trump, and Freddie Mac CEO Donald H. Layton (Credit: Getty Images, Fannie Mae and Freddie Mac)

President Trump is expected to sign a memo on Wednesday calling for an end to the federal conservatorship of the Fannie Mae and Freddie Mac mortgage guarantors, Housing Wire reported.

In 2008, the two government-sponsored enterprises were brought into conservatorship during the financial crisis by the Obama administration, their profits eventually siphoned off by the U.S. Treasury, effectively limiting the number of mortgages they can guarantee in a given year.

Trump officials have previously gestured that they would like to see the two publicly-traded companies leave federal control, including the entrance of competitors into the secondary mortgage market.

In Wednesday’s announcement from the the White House, the administration urges it is “promot[ing] competition in the housing finance market and create[ing] a system that encourages sustainable homeownership and protects taxpayers against bailouts.”

Under the memo’s guidelines, the Department of Housing and Urban Development and the Treasury Department are to work together on unwinding the GSEs from government control.

The White House also said it would work with Congress on more sweeping housing finance reforms.

Loans backed by Freddie and Fannie have an explicit government guarantee in case of default, which makes borrowing rates for those loans lower than market averages. The Trump administration has said that any plan to privatize the GSEs would still keep a government guarantee intact. The new proposal maintains that promise, “providing that the Federal Government is properly compensated for any explicit or implicit support it provides to the GSEs or the secondary housing finance market.” [Housing Wire] — Will Parker