Fannie Mae and Freddie Mac Winding Down?

Tuesday Senate Banking Committee leaders announced plans to move ahead with a new proposal to wind down Fannie Mae and Freddie Mac in favor of a new government backstop for private financiers.

Apparently Senate Banking Committee chairman Tim Johnson (D-South Dakota), and ranking member Mike Crapo (R-Idaho), this new reform proposal is due to lengthy exploratory hearings, negotiations, and drafting work from members on both sides.

The proposal builds on another bill introduced last year by Sens. Bob Corker (R-Tennessee) and Mark Warner (D-Virginia), and keeps as its fundamental the eventual elimination of Fannie Mae and Freddie Mac, and instead the installation of a Federal Mortgage Insurance Corporation (FMIC). This new FMIC would be modeled after the Federal Deposit Insurance Corporation (FDIC) and it would assist private creditors with their losses, if any, on failed loans, after the first 10 percent.

Call, text, or email me today! 

I’d seriously enjoy having the opportunity to talk to you about your plans if you’re moving, or if you know someone who is considering a move, and needs some straight answers.

The proposal also includes a provision which would require stronger underwriting standards.  Those would mirror the Consumer Financial Protection Bureau’s qualified mortgage definition, and they would establish some sort of a phased-in down payment requirement of 5 percent. First-time borrowers would not have to pay 5%, but instead they would only have to pay 3.5 %.

Other provisions in the plan include eliminating affordable housing goals which instead would be replaced with money acquired via an FMIC user fee, and the creation of a mutual cooperative, owned by smaller lenders to help ensure industry wide access to the secondary market.

Essentially it seems the intent is to phase out the recent status quo by getting rid of Fannie and Freddie, and to replace them with a different system to protect taxpayers. Using private capital, and by creating a strong and stable secondary market.

The draft still isn’t finished, and there are concerns about how this will work given a mostly Democratic senate and a Republican house…

I wonder how Fannie and Freddie’s investors will feel about this.

Zachary Epps, GRI, ABR, REALTOR®, Eco-Broker®, full-time RE/MAX professional, and author of

The Boulder Real Estate and Neighborhood Guide 

The Boulder Condo Guide 

The Home Buyer’s Handbook

Call, text, or email me today!… I’d seriously enjoy having the opportunity to talk to you about your plans if you’re moving, or if you know someone who is considering a move, and needs some straight answers.

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