CV Escrow | New Company to Take on Merged Functions of Fannie Mae and Freddie Mac
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New Company to Take on Merged Functions of Fannie Mae and Freddie Mac

New Company to Take on Merged Functions of Fannie Mae and Freddie Mac

iStock_000010136948XSmallIf you’ve ever slipped up and said “Freddie Mae” or “Fannie Mac,” you may have been onto something. As reported in the Los Angeles Times earlier this month, we may be looking at the beginning of the end for the two giants of mortgage financing.

Edward J. DeMarco, acting director of the Federal Housing Finance Agency, has announced that the federal regulator for Fannie and Freddie plans to create a “new business entity” that will take over duplicate functions of the nation’s two biggest mortgage backers. The merged functions of this new, as-yet-unnamed company would include packaging home loans owned or guaranteed by the companies into mortgage-backed securities, providing disclosures for the securities and paying investors, DeMarco said.

The new company would be owned and funded by Fannie and Freddie but would be independent and have its own chief executive and board chairman — all part of a move the Los Angeles Times called “the first step toward possibly shutting down the taxpayer-rescued firms.”

As reported in a separate Los Angeles Times article in February, the Obama administration and Congress want to shut down Fannie and Freddie and reduce the government’s role in the mortgage market. The long-competing companies, now 80% owned by taxpayers, have received about $187 billion in bailout money as of December, the latest available figures. Still, some fear closing their doors too quickly or too soon would further impair a fragile housing market. Key Democrats in Congress have even been pushing the duo to reduce mortgage payments and lower the loan amount owed for struggling homeowners as the FHFA presses on with its mission.

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