A Post Freddie Mac and Fannie Mae World

Last week, the Obama administration shared an outline of its plan to start reducing the government’s support of the mortgage market. Officials noted this process would consist of phasing out Freddie Mac and Fannie Mae and will likely take several years to complete. Officials also reported that the system would include a place for both the private and public sectors, but the government’s role would be less significant.

A report from the Wall Street Journal said, “The proposal offered a series of short-term steps that would help attract private capital into the mortgage market, including a reduction in the maximum loan sizes that Fannie and Freddie can purchase and gradual increases in the fees the mortgage companies charge lenders. Both of those steps could make it more attractive for lenders and investors to buy loans without government backing, but they could also raise borrowing costs for millions of Americans and weigh on the nation’s home-building industry.”

Due to the delicate housing market, officials believe the process to transition to a post-Freddie and Fannie world may take five to seven years. This process, which would include moving, reassembling and dismantling the firms’ infrastructure, may take even longer than the projected five to seven years.

How do you think the Freddie Mac and Fannie Mae phase out will affect your financial institution? Let us know in the comments section below.

Written by Banking.com Staff