Fannie, Freddie Could Be Phased Out Under Treasury Housing Plan

February 9, 2011 07:52

U.S. Treasury Secretary Timothy F. Geithner will present Congress with three options for reducing the government’s role in the nation’s decades-old housing finance system and shrinking the footprint of mortgage companies Fannie Mae and Freddie Mac.

By Lorraine Woellert, Nicholas Johnston and Rebecca Christie at


One option would eliminate the two firms and their government-backed guarantee of mortgages while another would hew closer to the present system, according to the two people familiar with the plan.

The government took control of the companies in September 2008 and they since have drawn more than $150 billion from the Treasury to cover losses linked to sub-prime mortgages.

The administration’s white paper will offer options for change without proposing legislation.

One of the three options is likely to be a complete government withdrawal from the mortgage-guarantee business now dominated by Fannie Mae and Freddie Mac, according to the people who have been briefed on the plan.

Because they own or guarantee more than half of all U.S. mortgages and have grown crucial to keeping capital flowing to lenders and borrowers, a broad restructuring of the $11 trillion mortgage system is expected to take years.

“I understand that selling some of these assets more rapidly could have an effect on their price,” the New Jersey Republican said in a Feb. 7 speech. “But almost every market participant I talk to says it can happen faster and, if it does, that it will reduce taxpayer risk.”


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