Business

Obama Administration Plans to Shut Down Fannie and Freddie

The Obama administration is working to attract more private funding for mortgage markets while winding down government-backed housing giants Fannie Mae and Freddie Mac.

U.S. Treasury Secretary Timothy Geithner told reporters that administration officials are exploring legislative options for overhauling the nation’s housing finance system with lawmakers on Capitol Hill, as well as with academics and other non-government agencies and advocacy groups.

In a white paper last February, the administration outlined three options for a long-term overhaul of the U.S. housing market. Each of those options proposed the elimination of Fannie and Freddie, though they differed on how or whether to replace the two agencies.

Congressional Republicans have also advocated shutting down the taxpayer-backed mortgage agencies, but on a faster timetable.

“We’re in a much earlier stage on housing reform” than with some other financial regulatory changes, said Geithner, though he add that, “What we’re going to try to do is lay the foundation for consensus.”

(Related: Senate Passes Insider Trading Ban for Members of Congress)

Geithner doesn’t expect a consensus any time soon. “It’s going to be a complicated process,” he said. “We don’t expect to legislate this year.”

The administration’s priority “is to repair the damage to homeowners, the housing market, and neighborhoods caused by the crisis,” Geithner said, referencing new measures posed by the president this week that would make it easier for struggling homeowners to refinance at record-low interest rates, thus reducing the size of their monthly mortgage payments.

[Editor’s note: the above is a cross post that originally appeared on Wall St. Cheat Sheet.]

Comments (56)

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  • billstanley
    Posted on February 4, 2012 at 8:42am

    Fannie Mae and Freddie Mac continue to bail out mortgage investors. After a home loan is obtained from a lender, the mortgage is sold into a secondary market where 95% of them are bought by Fannie and Freddie. They then package it with other mortgages, sell the bundled mortgages to investors and promise to continue payments on the mortgages even if the consumers stop paying. This became a problem in 2008 when many consumers stopped paying, depleting the excess reserves, causing insolvency and forcing Fannie and Freddie to default on their guarantees. Fannie and Freddie continue to post losses every quarter and receive subsidies from the federal government (taxpayers) to keep them solvent — these subsidies currently total $169 billion. Taxpayers should be outraged that this process is facilitated by compliant politicians. http://www.newsandopinions.net

    Report Post »  
  • billstanley
    Posted on February 4, 2012 at 8:40am

    Fannie Mae and Freddie Mac continue to bail out mortgage investors. After a home loan is obtained from a lender, the mortgage is sold into a secondary market where 95% of them are bought by Fannie and Freddie. They then package it with other mortgages, sell the bundled mortgages to investors and promise to continue payments on the mortgages even if the consumers stop paying. This became a problem in 2008 when many consumers stopped paying, depleting the excess reserves, causing insolvency and forcing Fannie and Freddie to default on their guarantees. Fannie and Freddie continue to post losses every quarter and receive subsidies from the federal government (taxpayers) to keep them solvent — these subsidies currently total $169 billion. Taxpayers should be outraged that this process is facilitated by compliant politicians. http://www.newsandopinions.net

    Report Post »  
  • wntsmallgov
    Posted on February 4, 2012 at 2:36am

    Sorry obama this is not going to make points with me, To use the phrase by Donald Trump “YOUR FIRED”
    The damage is already done by freddie and fanny we have to stay awake at the wheel.

    Report Post » wntsmallgov  
  • Salamander
    Posted on February 4, 2012 at 1:00am

    Now that they got caught with their hand in the cookie jar, Fannie and Freddie have no further utility for pushing their social agenda! So, Bwany gets ‘married’ and there will soon be some vacant real estate for rent in Maryland! By the way, I’m in the moving business, and you wouldn’t believe the number of people that tell me they have been forced out of their housing by the banks, who wouldn’t accept a work-out, refused a buyer and demanded to take possession of the property! Hmmm, what’s going on?

    Report Post »  
    • Apple Bite
      Posted on February 5, 2012 at 9:56am

      You want 1 answer out of that question?
      The housing market is the Banks backup plan in case of economic failure. Check out Wells Fargo’s ridiculously long list of houses for example. And they claim they don’t owe anyone any kind of explanation or not required to lend a helping hand for your mortgage going into default, even if you had contact through out the time.

      Report Post » Apple Bite  
  • Juniemoon
    Posted on February 3, 2012 at 10:54pm

    Soros is probably going to be your new landlord, call him George 21 from now on.

    Report Post » Juniemoon  
  • bmel
    Posted on February 3, 2012 at 9:52pm

    more then likely this is a ploy to allow the majority of the fannyfreddy thieves to slip away under the radar and get away with murder like Eric Holderf

    Report Post »  
    • pamela kay
      Posted on February 4, 2012 at 9:03pm

      BMEL, sure it is along with any paper work that goes with it. Obama is on a mission to appear to be concerned for our best interest. One by one he will knock out each and every issue that the GOP will use against him. He suddenly quotes the Bible, he will close Freddie and Fannie (which will still exist but under another name or lay temporarily dormant) He took out Binladen, he sent drones to Pakastan, the Seals rescued the American woman last week, etc. He is shooting for a title that he believes no one can take from him. He wants to come off as the top dog and will make sure that no one has the capability to beat him. More will follow.

      Report Post » pamela kay  
  • krackerhac
    Posted on February 3, 2012 at 9:31pm

    My mortgage just got bought by them. I wonder why? I have never requested or needed any assistance in obtaining a mortgage. It was a simple re-fi to lower my interest rate. I thought they were to help people who couldn’t get financing from other sources?

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    • Salamander
      Posted on February 4, 2012 at 1:02am

      No, they are really here to take the risk off the banks and mortgage brokers, so they can liquidate their investments and free up capital to make more ‘crappy’ loans for unqualified buyers, guaranteed by the tax paying public and the securities markets!

      Report Post »  
    • TXBadOneToo
      Posted on February 4, 2012 at 2:07am

      Salamander – the banks need to have capital to guy our record devt of T-Biills. China doesn‘t own us rather it’s US banks and the Treasury which own our debt. China only owns about $1.5 Trillion of our current (and growing) $15 Trillion in debt. Banks can get $$ for .25% from the Treasury and then buy T-Bills that return 3%+ w/o much risk – that’s why Fannie and Freddie need to keep buying up mortgages..

      Report Post »  
  • watashbuddyfriend
    Posted on February 3, 2012 at 7:53pm

    Is this political ploy, just to do mind control, and get votes? Watch the other hand!

    Report Post »  
  • Sicialian Eyeball
    Posted on February 3, 2012 at 7:43pm

    If this happens,I bet all the records will disappear like a fart in the wind.

    Report Post »  
  • soybomb315
    Posted on February 3, 2012 at 5:20pm

    I think the secretary of treasury should be picked by the party who lost the election. These days, the treasury is just a means for the executive branch to do unconstitutional things not authorized by the congress. In fact, i would like to see things set up so that washington never gets anything done (complete gridlock)

    Report Post » soybomb315  
    • Chuck Stein
      Posted on February 5, 2012 at 1:59am

      There is a lot to your idea. On a state level, I have said for years that the treasurer and auditor should both run for treasurer and the auditor spot goes to the candidate with the second most votes.

      Report Post »  
  • gemmeri
    Posted on February 3, 2012 at 4:39pm

    I don’t think anyone needs to be politically savvy or understand politics in general to know this is the worst idea yet to come out of the Obama administration & this is another blatant move to destabilize our nation. Well, I hope all of you who voted for him are really proud of yourselves for selling out your countrymen. You must really be congratulating yourselves on shoving people out of their primary homes & shelters right about now. I can only pray that when the shooting starts because the victims of your stupidity have nothing left to lose that you are the first to go down in the storm of bullets. It must comfort you to know that you have done this nation in like no one else before you.

    Report Post »  
  • Ghandi was a Republican
    Posted on February 3, 2012 at 4:24pm

    Of course this would be a ruse to create a newer, bigger and more irresponsible entity. Obama/soros/progressives are all about centralizing and taking over. What he has done to the community banking system is solid evidence. Always the ruse..

    Report Post » Ghandi was a Republican  
  • packsack54
    Posted on February 3, 2012 at 4:13pm

    Let see we will be getting new neighbors soon, can you speech chinesse?

    Report Post »  
  • filbert
    Posted on February 3, 2012 at 4:06pm

    I would applaud the demise of Fannie and Freddie, if I wasn’t as sure as the sun rises in the east that Obama will use the opportunity to further pay off his cronies and political supporters.

    Report Post »  
    • gemmeri
      Posted on February 3, 2012 at 7:32pm

      I would also like to see the eventual demise of these programs, but they are so entrenched that they would have to be restructured & then phased out gradually so more people don’t lose their homes. It could be done… But they won’t do the right thing. They never do.

      Report Post »  
  • Vickie Dhaene
    Posted on February 3, 2012 at 4:05pm

    Of course their not going to work on legislation this year. Surely not an election year. Land and mortgage are the only collateral we can offer CHina right now.
    Doesn’t take an economist to figure that out.

    Report Post »  
  • packsack54
    Posted on February 3, 2012 at 3:58pm

    Heck they did not learn at darn thing for the S&L in the 80′s. Oh by the way those bonds should be becoming due about now for that bailout. Only about 80 billion if I remember right, not sure, so this one we will loss how much? If we sell it to private group(Banks) cents on the dollar. Just another Taxpayor screwing. They do not care as the debt climbs as they have intention of balance budget. Learn that in Ecomonic long ago. It willbe a fire sale someday. Just like Greece? Who will own your mortgage? After that do not be a dollar short or day late on your payment? Yes with S&L I think a Bush was involved in the Bank in CO that failed.

    Report Post »  
  • jdegner
    Posted on February 3, 2012 at 3:39pm

    I’m trying to think how this will play out. Let’s try this on for size:
    -Debt is purchased at rock-bottom discounts by Obama‘s friends at Goldman Sachs and sold from the Fed who actually holds a ton of Fannie and Freddie’s debt
    -Fed announces QE3, and along with the subsequent suckers’ rally in stocks, housing prices rise
    -Resulting higher prices in housing allow the guys at GS to sell off the ‘bad debt’ ie. actual forclosed properties at a lucrative profit
    -Finally, housing becomes even more expensive for average people, but have no fear, the boys at places like GS will create new loan products to ‘help’ the poor get into housing that they can’t afford
    -It’s been the same story since the New Deal!!

    Report Post »  
    • JRook
      Posted on February 3, 2012 at 3:48pm

      Wall Street like the wealthy and big corporations BUY and OWN both sides of the isle. To even remotely suggest that republicans are somehow more ethical or have higher integrity is laughable at best.

      Report Post »  
    • 13th Imam
      Posted on February 3, 2012 at 4:06pm

      Barry played out the F & F Goldmine for all it was worth. His Buds pocketed the Cash and now is funneling it back into Barry’s Screw America Four More Years Reelection Tour. Like ACORN it will spring up into another, newly named DEMOCRAT Cesspool.

      Report Post » 13th Imam  
    • JRook
      Posted on February 3, 2012 at 4:15pm

      @13th Imam Let’s keep in mind that former Goldman Sachs staff were also selected by Bush for the Treasury. You keep pretending that this parlor game that the wealthy and big corporations provide regarding conservatives and liberals means something. While they keep transferring wealth upwards through any means possible. The largest one being federal spending and the federal deficit. Like a lot of people you probably believe 401K s were actually created to help the general public. Take a minute to check the P/E rations before 401 Ks and the explosion of mutual funds and what they are today. Who do you think benefits the most from drastically overvalued companies.

      Report Post »  
    • 13th Imam
      Posted on February 3, 2012 at 4:22pm

      Gobbledegook, Nonsense, Lawyer Speak

      Report Post » 13th Imam  
    • soybomb315
      Posted on February 3, 2012 at 5:24pm

      “I believe that banking institutions are more dangerous to our liberties than standing armies.” -Thomas Jefferson

      Report Post » soybomb315  
    • 13th Imam
      Posted on February 3, 2012 at 7:54pm

      Except our BANKING Systems nowadauys are GOV run, Gov Regulated , Gov Browbeat

      Report Post » 13th Imam  
  • Azalea
    Posted on February 3, 2012 at 3:32pm

    I wouldn’t trust a single thing Obama “says” he is doing. If the Dems want to shut these entities down, you’d better be asking WHAT sneaky plan do they have to replace it.

    Report Post » Azalea  
    • barber2
      Posted on February 3, 2012 at 4:44pm

      Agree. Have never had so little faith or confidence in any administration than in this one. Smoke and mirrors..99% Baloney, Partisanship, Blame Gaming, and Class Warfare..

      Report Post »  
  • Netizen Kane
    Posted on February 3, 2012 at 3:22pm

    And why not? Freddie and Fannie have achieved exactly what they were created for: A massive transferral of property and wealth and a crippling of the U.S. Economy. Mission accomplished!

    Report Post » Netizen Kane  
    • barber2
      Posted on February 3, 2012 at 3:38pm

      Agree. Force banks via the Race Card/ Discrimination / and those early ACORN OCCUPIES at bankers homes to give loans to ” the poor.” Then when the economy tanks, blame the banks! Way to go, Democrats! Anything to “prove that capitalism doesn’t work ( ..when capitalism is infused with socialism…pssst: don’t mention that last part.! ) Blame the Banks. Blame Capitalism. Blame Bush !

      Report Post »  
  • NOBALONEY
    Posted on February 3, 2012 at 3:07pm

    Obama administration will sell Fannie Mae and Freddie Mac to the Chinese as a means of reducing the debt.

    Report Post » NOBALONEY  
    • packsack54
      Posted on February 3, 2012 at 4:08pm

      So when you can not make your payment they take over your property no question asked? All legal. Paid for with the worthless dollars we owe them, 800 billion we sent in new money called amerco(sp) Check utunes.

      Report Post »  
  • kimberlyjesus
    Posted on February 3, 2012 at 3:04pm

    Oh obama is a little to late to fix the housing market. You and the banks raped us Americans by over inflating the housing market causing this recession and instead of working with the home buyers to keep their homes you and the banks that you gave money to raped us again by allowing other people to buy our homes at outrageous amounts but wouldn’t allow us to refinance at that low rate and keep our homes. You allowed investors to make profits off the missfortunate and threw us to the street. obama, we don’t need you to run our country anymore. GOD will be in control real soon. There will be no more government in control to waste GOD’S money.

    Report Post »  
  • hersey10
    Posted on February 3, 2012 at 2:55pm

    So who will now own that patent for the electrical outlet lock ?

    Report Post » hersey10  
  • Matt
    Posted on February 3, 2012 at 2:50pm

    The only solution that will help the housing market in the long run is for the Government to GTFO of the housing market alltogether. Who will own the high risk mortgages? I say that we repeal the law that permits them to exist and allow banks to revoke all of those loans. Kick all those fools out of their houses that they should never have bought in the first place. But at the same time, forgive their loans. It would hurt the economy a little at first, But setting a broken bone always hurts. But it wouldnt hurt that much. People would not be saddled under debt they cant pay, and banks would be no worse off, its not like people were paying off their subprime mortgages anyways.

    Report Post »  
    • Matt
      Posted on February 3, 2012 at 2:51pm

      The idea that everyone should own a home is great. But owning a home at the cost of collosal debt isnt worth it. The psychological and emotional damage that comes from being in too much debt far surpasses the pleasure of owning a big home.

      Report Post »  
  • Kankokage
    Posted on February 3, 2012 at 2:46pm

    I think this is probably a good thing. Of course, until we find out what the replacement is.

    Report Post » Kankokage  
  • lukerw
    Posted on February 3, 2012 at 2:22pm

    So… whom is going to own all the Mortgages?

    Report Post » lukerw  
    • lel2007
      Posted on February 3, 2012 at 2:31pm

      Who’s going to own all the high risk mortgages?

      Report Post » lel2007  
    • netmail
      Posted on February 3, 2012 at 2:46pm

      Obama is going to take out some Farmer‘s Insurance and it’s going to be “like it never happened”.

      Report Post »  
    • barber2
      Posted on February 3, 2012 at 4:37pm

      Hmmmm. Does the term “ high risk” tell you something ?? Apparently not the government when it is playing the Discrimination Card…

      Report Post »  
    • Hollywood
      Posted on February 4, 2012 at 11:13am

      You and, and all taxpayers. That’s who!

      Report Post » Hollywood  
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