Break Up of Fannie & Freddie Proposed? Posted by AVCU on 11:49 AM

According to a report in CU Today, two senators are working on a bipartisan plan to overhaul Fannie Mae and Freddie Mac, including breaking up the giant mortgage finance companies that are currently operating under U.S. conservatorship.

Sen. Bob Corker (R-TN) and Sen. Mark Warner (D-VA) are seeking to foster competition in the secondary mortgage market, Bloomberg reported.

The federal government has been debating what to do with Fannie and Freddie since taking control of the companies in 2008 as the housing market crashed.  Together, the companies back more than $4 trillion in securities. The federal government injected $187 billion into the two firms to keep them afloat.

One guiding principle behind the plan is to end the duopoly Fannie and Freddie hold in the mortgage market in order to encourage competition and to reduce the substantial risk the two companies present to the federal government, Bloomberg reported.

Among the proposals being considered is letting private competitors use some of Fannie and Freddie’s infrastructure, such as the intellectual property the companies use to securitize mortgages or the data they rely on to determine whether one loan is riskier than another, according to Bloomberg.

Other ideas considered include splitting Fannie and Freddie’s single-family businesses from their multifamily businesses, which finance apartment rentals, Bloomberg added.