Fannie Mae, Freddie Mac And A Possible Breakup

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A Possible Breakup:

Fannie Mae and Freddie Mac have long been rumored for a breakup with the Federal Government ever since being taken over in 2008.  However breakups are hard; especially when it comes to trillions of dollars in mortgages.  It’s not as easy as just saying “Your on your own Fannie and Freddie!”.  In the latest revival of ending the relationship close relationship with Federal government and the large mortgage corporations we’re seeing some unity between the two parties.  A Democrat, Mark Warner from Virginia and a Republican, Bob Corker from Tennessee are leading the charge to reform the relationship between the Federal government and the mortgage giants.

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The headlines seem to usually read how much money the government has put into the two companies however it fails to include that not only has this money been paid back but the government is actually making a profit off it’s investment.  What’s a bit different is it appears they are looking at dividing the companies into two categories of business, and not necessarily ending the close Federal government relationship immediately.   Per various news reports the initial stage would be to split the business into Single Family Residential mortgage loans and Multi-Family Residential mortgage loans.  From there they would explore further splits and a possible move to private ownership. Will this plan affect borrowers getting a mortgage or will it affect mortgage rates?  Probably not so there should not be too much concern at the consumer level at this point until we see the details.  That being said I wouldn’t hold my breath waiting for any meaningful reform of the relationship between the Federal government and the two mortgage giants.  This is Washington we’re talking about and if one thing is clear – gridlock remains supreme.

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