3 Steps to Involve Private Investors, Squeeze Out Freddie, Fannie

Attention private real estate investors: The FHFA recently released a 3-step plan to lessen the role of Freddie Mac and Fannie Mae in the mortgage industry and shift it to private investors. Since 2008, when Freddie and Fannie were placed in conservatorship by the US Treasury, they have received more than $180 billion in taxpayer support. To date, there is no resolution in sight, so the terms of the conservatorship need to change. Together, they guarantee 3 of every 4 mortgages.

  1. Build a new infrastructure that allows private investors to participate in the secondary market. This would include “national standards for the mortgage securitization process“ to be used to develop the mortgage market.
  2. Transfer mortgage credit risk from Freddie and Fannie to private investors. Several plans are already in place to see that this happens. One includes a “gradual increase in guarantee fee pricing so the price is closer to the level expected if mortgage credit risk was based on private capital.” Another proposes loss-sharing plans to have investors bear part of the credit risk.
  3. Continue efforts to prevent foreclosures and make mortgage credit available.

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