The U.S. Treasury Department released a plan on September 5, 2019, restructuring the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac). Both are government-sponsored enterprises (GSEs).
The government put the two companies into conservatorship in 2008 and subsequently received approximately $190 billion from the Treasury Department. The two companies have since returned to profitability and repaid their debt to the Treasury. Policymakers in Washington have discussed the next moves for the two companies for several years now. In March 2019, President Trump issued a Presidential Memorandum directing the Secretary of the Treasury to develop a plan for administrative and legislative reforms to address this last unfinished business of the financial crisis.
Fannie and Freddie, along with the Federal Housing Administration (FHA), guarantee over half of the $10 trillion U.S. home loan market. Any changes to Fannie and Freddie will have an impact on the mortgage market.
The central component of the Treasury Department’s plan is making the companies private again, but with sufficient private capital to prevent the companies from seeking another financial bailout. The Treasury Department also recommends that Fannie and Freddie pay a fee for any backing it has from the U.S. government. Some have suggested this may raise the cost of mortgages, but others suggest it is a necessary component of the plan.