Trump moves to end Fannie, Freddie conservatorship
President Trump issued a memorandum regarding the overhaul of mortgage giants Fannie Mae and Freddie Mac on Wednesday, alongside a host of proposed reform measures aimed at increasing competition in the housing market and shielding taxpayers from future bailouts.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| FMCC | FEDERAL HOME LOAN MORTGAGE CORP. | 2.52 | -0.58 | -18.71% |
| FNMA | FEDERAL NATIONAL MORTGAGE ASSOCIATION | 2.57 | -0.56 | -17.89% |
The administration is instructing the Treasury Department and the Department of Housing and Urban Development to develop policy recommendations for ending the conservatorship of Fannie and Freddie, while improving oversight of the mortgage giants.
The Treasury may establish capital and liquidity requirements for the government-sponsored enterprises, in addition to defining their role within different markets.
In the decade since the financial crisis, there have been no “comprehensive” changes made in the housing system, despite the “need for it,” according to the White House.
Among the administration’s other stated reform goals where it pertains to housing are improving access to sustainable mortgages, preserving the 30-year fixed-rate mortgage and enabling access to federal housing programs to help finance the purchase of first homes.
The frameworks are to be submitted by the designated agencies as soon as “practicable.”
“I look forward to working with FHFA, HUD, Congress, and other stakeholders to address the need for housing finance reform as laid out by President Trump’s Presidential Memorandum," Treasury Secretary Steven Mnuchin said in a statement. "An effective and efficient federal housing finance system will also meaningfully contribute to economic growth.”
At the beginning of the year, ending the conservatorship of mortgage giants Fannie Mae and Freddie Mac seemed like an imminent possibility, after a report was released that the Trump administration was looking to potentially act without Congress to end federal control of the housing authorities.
Following push back from the White House, later that month, Federal Housing Finance Agency acting director Joseph Otting wrote a letter to lawmakers saying that he welcomed their perspective on terminating the conservatorship.
The White House said in a statement on Wednesday that it “wants to work with Congress to achieve comprehensive reform.” The memo asked for agencies to identify reforms that can be enacted without Congress, too.
Fannie and Freddie have been operating within the government since being bailed out for nearly $200 billion at the height of the financial crisis.
The two government-sponsored enterprises do not originate loans – instead they purchase and guarantee them on the secondary market.
Privatizing the entities has been a longtime goal of U.S. Treasury Secretary Steven Mnuchin, who told FOX Business in November 2016 that the administration had to “get them out of government control.”
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Taking Fannie Mae and Freddie Mac out from under government control could be a boon to shareholders – who have essentially had shares wiped out. As of 2012, profits from Fannie and Freddie have been redirected to the U.S. Treasury.