The regulator overseeing Fannie Mae and Freddie Mac has announced a new idea to reform the mortgage giants. It involves starting a joint venture to bundle mortgages into securities that people can invest in.
Fannie Mae and Freddie Mac were taken over by the government during the housing crisis. At that time they were bleeding red ink. But last week, Freddie Mac announced it made $11 billion in 2012.
“They’re doing as good a job as anyone could want,” says Guy Cecala, who publishes Inside Mortgage Finance, “and it’s unclear whether we could create a system that would be as efficient and as profitable as what’s currently in place right now.”
That’s exactly what the new plan hopes to do. It would create a new entity that would be responsible for the final steps in turning mortgages into securities for investors.
But not everyone likes that idea. Ken Posner, with Capital Bank Financial, says it would allow more government involvement in the mortgage market.
“When you create a new entity, you haven’t closed the door all the way,” he explains. “You’ve left it open a crack. And that could come back to haunt you.”
Congress and President Obama have the final say on government housing policy — and whether Fannie and Freddie stay or go.
We’re here to help you navigate this changed world and economy.
Our mission at Marketplace is to raise the economic intelligence of the country. It’s a tough task, but it’s never been more important.
In the past year, we’ve seen record unemployment, stimulus bills, and reddit users influencing the stock market. Marketplace helps you understand it all, will fact-based, approachable, and unbiased reporting.
Generous support from listeners and readers is what powers our nonprofit news—and your donation today will help provide this essential service. For just $5/month, you can sustain independent journalism that keeps you and thousands of others informed.