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Chrisman's Corner: Fannie & Freddie Are Going Nowhere in the Near Future

The public has heard a lot of news about Fannie Mae and Freddie Mac. Most of us know that Fannie & Freddie are somehow involved in mortgages. JMAC’s experienced brokers know that their mission is to provide a secondary market for lenders to deliver loans into and help keep the housing market stable. Unfortunately for the industry they were taken over in 2008, and the question is, “Will they be around in the future?”

When both were losing billions of dollars every quarter there were plenty of people who wanted to put them out of business. But proponents of the two Agencies say that the two companies should continue to exist. Freddie and Fannie advertise of the steps they’re taking to boost stability and competition in the mortgage market, while stopping short of urging lawmakers to drop plans for an overhaul that would put them out of business. There’s a lot of reform that’s already underway at Freddie and Fannie Mae in the areas of technology, creating deals that transfer credit risk, and improving customer service.

And something seems to be working. Given their results in the 3rd quarter Fannie Mae, which had a third-quarter profit of $3.9 billion, and Freddie Mac, which reported $2.8 billion, will have sent taxpayers $38 billion more than they took in the aid. The payments are considered to be a return on the U.S. investment and not a repayment, which means there’s no legal avenue for them to exit conservatorship.

JMAC AEs know that any decisions about the company’s future are up to the Federal Housing Finance Agency and Congress. And there is broad agreement among lawmakers from both parties that Fannie Mae and Freddie Mac should be wound down as part of an effort to reduce the government’s involvement in housing finance. Still, the Senate this year failed to take a final vote on a bipartisan bill that would have replaced them with a government insurer that would suffer losses only after private investors had been wiped out. And a House plan that would have dismantled the two companies also failed to move forward. And with Republicans now set to hold majorities in both houses, a scenario in which Congress lets Fannie Mae and Freddie Mac become independent without substantial changes is increasingly unlikely.