Guaranteeing roughly half of the $10 trillion U.S. home loan market, Fannie Mae and Freddie Mac have become profitable again since the government bailed them out during the 2008 recession.
A new plan would end their operation under so-called government conservatorships and return the companies to private shareholders, thereby reducing risk to taxpayers while still preserving homebuyers’ access to the 30-year, fixed-rate mortgage.
The government’s sponsorship comes in the form of an implicit guarantee that it intercedes in the event of the companies’ failure, which is what happened in 2008. Under the new plan, the companies’ profits would no longer go to the Treasury; instead, they’d be used to build up their capital bases to cushion against possible future losses. The director of the Federal Housing Finance Agency believes the new plan would likely take effect after 2020.