Feds Want to See More Fannie Mae and Freddie Mac Help in US Housing Market

Fannie Mae

The Federal Reserve Board told Congress this week that Fannie Mae and Freddie Mac, both government-run mortgage finance companies, could be instrumental in helping to get the wallowing US housing market back on track.

Not All Agree

The proposal to use the government mortgage companies to improve the housing situation  threatens to run into hurdles from politicians opposed to the idea.

The Federal Reserve sent a paper to the legislators on Wednesday describing concrete steps which the government can take to help jump-start the lackadaisical housing market, including letting Fannie and Freddie provide affordable mortgages to a larger number of potential homeowners.

Freddie and Fannie Problematic

It is not so simple, however. The two mortgage companies were seized by the government over three years ago as they were about to fall apart despite the fact that they are the biggest sources of US mortgage funding. Since then they have been held together with $169 billion in taxpayer money, making them an easy target of lawmakers on the Hill.

Obama Not So Sure

Even the Obama administration has expressed a desire to reduce the role the government plays in housing finance. Such a reduction was part of a three-pronged program to reform the US finance system that Obama’s administration laid out last year.

“It comes at a time that Congress has become quite skeptical of Fannie and Freddie and their role, and seems to be looking for ways to diminish their long-run role in housing finance, not increase it,” said David Resler, chief economic adviser at Nomura Securities International.

About Alison Meadows

Alison Meadows has a PHD in Economic Trends in Modern Times and is a known writer who focuses on hedge fund investments. Meadows, her husband, and three kids live in Boston, where she grew up and attended college. Contact Alison at alison[at]businessdistrict.com