FHFA Plans for Joint Venture to Replace Fannie Mae and Freddie Mac

Fannie Mae and Freddie Mac could end up forming a joint venture that will perform the securitization portion of their business, if plans move forward as laid out by Federal Housing Finance Agency chief Edward DeMarco to a attendees of a business economics association this week. 

Among much speculation as to the portion of the housing market currently financed by the government-sponsored agencies and how to “wind down” their participation in the market, CNBC reported on the potential outcome based on DeMarco’s comments. 

CNBC reports:  

Fannie Mae and Freddie Mac will form a joint venture for securitizing home loans that could end up replacing the two government-controlled mortgage finance giants, their regulator said on Monday.

“The overarching goal is to create something of value that could either be sold or used by policymakers as a foundational element of the mortgage market of the future,” Edward DeMarco, acting director of the Federal Housing Finance Agency, told the National Association for Business Economics.

Fannie Mae and Freddie Mac, which help finance about two-thirds of new U.S. homes loans, were seized by the government in 2008 as mortgage losses mounted. They have drawn nearly $190 billion from the U.S. Treasury to stay afloat.

DeMarco said the goal was to build a single infrastructure to support the mortgage credit business that could be privatized, merged into the government or function as a utility. The two companies would have to abandon their separate systems.

“We are on a path to replace the outdated proprietary operational systems of Fannie and Freddie,” DeMarco told reporters on a conference call ahead of his speech. “It could be turned to some form of a market utility.”

Democrats and Republicans on Capitol Hill agree that Fannie Mae and Freddie Mac should eventually be wound down, but have failed to find common ground on what should replace them. DeMarco’s plan provides an interim structure for some of their business, but the ultimate decision remains in Congress’ hands.

The new company will be structured as a joint venture that is owned by Fannie Mae and Freddie Mac, DeMarco told reporters as he laid out FHFA’s plans for 2013…

Read the full report on CNBC

Written by Elizabeth Ecker

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