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The Real Deal Los Angeles

Former FHFA head wants to turn Fannie, Freddie into insurance companies

Proposal could boost debate over mortgage giants’ future
From left: Edward DeMarco and Michael Bright

From left: Edward DeMarco and Michael Bright

From the New York website: A former head of the Federal Housing Finance Agency wants to turn the government-backed mortgage giants Fannie Mae and Freddie Mac into lender-owned insurance companies.

Edward DeMarco, who ran the agency overseeing Fannie and Freddie for more than four years, and Michael Bright wrote a proposal for the think-tank Milken Institute that would turn the two firms into mutual insurance companies.

Although created by the federal government, Fannie and Freddie were technically private companies owned by shareholders until 2008. They buy residential and some commercial mortgages from lenders, stamp them with a repayment guarantee and securitize them in return for a fee – de-facto insuring them.

Under the Milken proposal, Fannie and Freddie would ditch this implicit insurance and become actual insurance companies that would let lenders buy insurance policies against their borrowers’ defaults.

The federal government has long implicitly guaranteed the firms’ mortgage bonds. In 2008, amid the U.S. housing crisis, it took control of the firms and bailed them out with a $187.5 billion cash infusion. Since then, Congress and the White House have hotly debated what to do with Fannie and Freddie. Although new legislation is unlikely to pass before the November elections, the Milken Institute’s proposal could give the debate new momentum. [Bloomberg]Konrad Putzier

  • Glen Bradford

    Thank god ed demarco is still trying to steal gse assets even not as fhfa director.

  • Glen Bradford

    Thank god ed demarco is still trying to steal gse assets even not as fhfa director.

  • Glen Bradford

    Thank god ed demarco is still trying to steal gse assets even not as fhfa director.

  • HaloHat

    First of all, it has been proven without a doubt that Fannie and Freddie did not need “bailed out”. In fact Fannie and Freddie are actually the ones that bailed out the US Government. The Too Big To Fail and Too Big To Jail banks who due to documented liquidity issues would have had a run on themselves would have all gone broke causing our and other nations economies to crash. Select Wall Street organizations who created securities that the SEC and the security rating giants who gave A+ and other such ratings thereby giving the false impression that these securities were as safe as Fannie and Freddies when they were obviously not.

    Fannie and Freddie are not the only “GSE’s”. They operated more safely than any other participant in this arena. The US Government failed miserably and cause the 2008 problems to become vastly worse by putting Fannie and Freddie into Conservatorship.

    If you wish to become educated in this matter you can learn more than most by doing two things at the least –

    1. Read J. TImothy Howard’s book – The Mortgage Wars
    I’m not trying to sell books for Mr. Howard, check it out of your library.

    2. Start digesting the vast resources and documents at GSElinks dot com
    especially the recent court documents showing the government has lied all along.

  • HaloHat

    First of all, it has been proven without a doubt that Fannie and Freddie did not need “bailed out”. In fact Fannie and Freddie are actually the ones that bailed out the US Government. The Too Big To Fail and Too Big To Jail banks who due to documented liquidity issues would have had a run on themselves would have all gone broke causing our and other nations economies to crash. Select Wall Street organizations who created securities that the SEC and the security rating giants who gave A+ and other such ratings thereby giving the false impression that these securities were as safe as Fannie and Freddies when they were obviously not.

    Fannie and Freddie are not the only “GSE’s”. They operated more safely than any other participant in this arena. The US Government failed miserably and cause the 2008 problems to become vastly worse by putting Fannie and Freddie into Conservatorship.

    If you wish to become educated in this matter you can learn more than most by doing two things at the least –

    1. Read J. TImothy Howard’s book – The Mortgage Wars
    I’m not trying to sell books for Mr. Howard, check it out of your library.

    2. Start digesting the vast resources and documents at GSElinks dot com
    especially the recent court documents showing the government has lied all along.

  • HaloHat

    First of all, it has been proven without a doubt that Fannie and Freddie did not need “bailed out”. In fact Fannie and Freddie are actually the ones that bailed out the US Government. The Too Big To Fail and Too Big To Jail banks who due to documented liquidity issues would have had a run on themselves would have all gone broke causing our and other nations economies to crash. Select Wall Street organizations who created securities that the SEC and the security rating giants who gave A+ and other such ratings thereby giving the false impression that these securities were as safe as Fannie and Freddies when they were obviously not.

    Fannie and Freddie are not the only “GSE’s”. They operated more safely than any other participant in this arena. The US Government failed miserably and cause the 2008 problems to become vastly worse by putting Fannie and Freddie into Conservatorship.

    If you wish to become educated in this matter you can learn more than most by doing two things at the least –

    1. Read J. TImothy Howard’s book – The Mortgage Wars
    I’m not trying to sell books for Mr. Howard, check it out of your library.

    2. Start digesting the vast resources and documents at GSElinks dot com
    especially the recent court documents showing the government has lied all along.