Trump administration calls for privatizing Fannie, Freddie

by Ryan Smith21 Jun 2018

A new proposal by the Trump administration would end government conservatorship of Fannie Mae and Freddie Mac, fully privatizing the mortgage-finance giants.

The proposal was included in a document titled “Delivering Government Solutions in the 21st Century,” an Executive Branch report that recommended sweeping overhauls of many government departments and programs.

The report said that the government’s role in housing finance is confused by “overlapping and sometimes conflicting” goals and by the decade-long conservatorship of the GSEs.

“The Federal role in support of housing finance is not effectively targeted to households in need of assistance or sufficiently accountable to taxpayers, as the costs and benefits of that support are unclear,” the report said.

The report recommends fully privatizing Fannie and Freddie and placing them under the regulatory oversight of a federal entity with “secondary mortgage market experience.” That entity would also have the power to “develop a regulatory environment that is conducive to developing competition amongst new private guarantors and the incumbent GSEs, ensuring they would all be adequately capitalized and competing on a level playing field.”

“If the GSEs lost some of the benefits that have led them to dominate the market, this would enable other private companies to begin competing in this space,” the report said.

 

Related stories:
FHFA proposes new risk-based capital requirements for Fannie, Freddie
DOJ investigating fraud, antitrust violations over Fannie, Freddie bonds – report

 

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