Congress Would Decide Roles of Fannie, Freddie

 

Washington, DC, Feb. 11, 2011 -- The Obama administration has proposed in a white paper released on Friday to wind down Fannie Mae and Freddie Mac, the government-sponsored enterprises that support more than 90% of the mortgage market.

“This is a plan for fundamental reform – to wind down the GSEs, strengthen consumer protection and preserve access to affordable housing for people who need it,” said Treasure Secretary Tim Geithner.

The difficult decisions would be made by Congress.

The government would have a much smaller role in housing in each of three options presented in the white paper.

In one option, the government’s role would be limited to the Federal Housing Administration, which currently provides access to mortgage credit for poorer borrowers.

In another, the government would also maintain a guarantee over mortgages but priced to the banks at a higher level so it would only be competitive in the absence of a functioning private market.

In annother, the government would be a last-ditch insurer of the market and be the fallback in case of a catastrophe.