Mayopoulos: Treasury’s housing finance plan could prevent disruption in housing market

GSEs are "profoundly different" than before housing bust, former Fannie CEO says

Tim Mayopoulos, the former CEO of Fannie Mae who now is president of Blend, said the Trump administration’s housing finance plan released earlier this month may allow the government to privatize Fannie Mae and Freddie Mac without causing disruption in the housing market. 

The so-called roadmap released by Treasury earlier this month already has some consensus in Congress because it expands on reform efforts that began during the previous administration, Mayopoulos said in a Bloomberg TV interview.

“The administration’s plan really builds on previous ideas that were identified during the Obama years and have been built on since then,” Mayopoulos said. “The good thing about this is that it will preserve the 30-year fixed-rate mortgage, and it will preserve the key infrastructure that Fannie and Freddie represent in the housing finance market. It will put substantial private capital in front of any taxpayer exposure, and if all this is implemented successfully I think it has the prospect of avoiding any kind of major disruption in the housing market.”

Changes already implemented at the government-sponsored enterprises have made them “profoundly different” than they were before the financial crisis, Mayopoulos said.

“They are actually much better institutions,” he said. “They run much more effectively, taxpayers are better insulated, they have much more effective credit risk management techniques, they are profoundly different than they were before the crisis, so even though they continue to play a big role in the system, they are sub different and sub better than they were before.”

One thing that’s clear, Mayopoulous said, is taxpayers have benefited from the 2008 bailout of the companies.

“Taxpayers have received the amount of their investment in these companies back plus another $100 billion from Fannie and Freddie on top of that,” Mayopoulos said. “The government still owns nearly 80% of both of these companies and if it chooses to sell those stakes, the taxpayers can make that much more money.”

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