Trump Administration Releases Reform Plans for Fannie Mae and Freddie Mac
After months of anticipated waiting, the U.S. Department of the Treasury released its plan to reform the housing finance system today.
In March 2019, President Trump issued a Presidential Memorandum directing the Secretary of the Treasury, Steven Mnuchin, to develop a new plan for administrative and legislative reforms to protect American taxpayers against future bailouts. The new reforms would also preserve the 30-year-fixed mortgage and, “… help hardworking Americans fulfill their goal of buying a home.”
The Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac), together known as the Government-sponsored enterprises (GSEs), suffered significant financial loss in 2008, which resulted a $190 billion bailout from the Treasury.
With this new reform comes the plan to overhaul the house finance system and the process of removing Fannie Mae and Freddie Mac from government conservatorship. The 53-page report includes 49 recommended reforms, with a preference for lawmakers to reach a deal on comprehensive changes.
According to Housing Wire, the recommendations also include: simplifying the Qualified Mortgage rule and eliminating the “QM patch” which allows Fannie Mae and Freddie Mac the ability to sidestep some regulations, reducing “unnecessary regulatory impediments” for private-label securitization, and promoting private-sector competition.
This call for change is the “last unfinished business of the financial crisis”, said the Treasury Department.
For more information, read the full report here.
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