Why Fannie & Freddie Restructuring Was Postponed Again

Future of Fannie/Freddie Postponed Again
The deadline for a proposal to restructure Fannie Mae and Freddie Mac, something required by the Dodd-Frank Finreg bill, has been pushed to mid-February. F&F own about half the $10+ trillion of outstanding home loans and the plan must address how the government continues backing existing mortgage-backed securities and how to structure a market with no government guarantees for some products. It’s a tough issue, with questions like this at the forefront: Is there enough capacity in capital markets to finance mortgages without some type of government guarantee? If you’re a money manager in Taiwan or Egypt, wouldn’t you demand a higher rate of return to match the risk without any government guarantee? And if bank-owned cooperatives issue government-backed mortgage bonds, wouldn’t that concentrate more power among the largest U.S. banks?

No wonder politicians keep postponing it. There are no easy answers, unless you’re making surface-level media commentary.

Fannie & Freddie Foreclosures Have Increased Fivefold
Speaking of Fannie & Freddie, their combined inventory of foreclosed residential property has quadrupled in just three years and now stands at $24 billion, and the 241,000 properties on their books has increased fivefold. That’s roughly a third of the total U.S. portfolio of repossessed homes. And the numbers show no signs of declining, since it seems that nationwide foreclosures are going up faster than buyers can be found.