WASHINGTON: The US Treasury Department said on Tuesday it has suspended government stake changes in housing giants Fannie Mae and Freddie Mac that were imposed in the final days of the Trump administration.
Those changes are aimed at rolling back certain types of mortgages, including second homes, multi-family homes and homes purchased with high-risk loans, after the Trump administration instructed the pair to reduce their footprint in the housing market. The capacity of the agencies is to be curtailed.
The Federal Housing Finance Agency, which controls the pair, is reviewing those changes and consulting with the Treasury on other possible changes.
The suspension effectively halts changes made in the final days of the Trump administration. The then Treasury Secretary Steven Mnuchin attempted to create a blueprint to get Fannie and Freddie out of government control.
In January 2020, the Treasury Department announced that it had changed its stake in the pair, including allowing them to retain a profit in exchange for a larger government stake in the enterprises.
However, housing advocates worry that this could undermine the enterprises’ core mission of making housing more affordable.
The pair, which guarantees more than half of all US hostages, has been under government control since a 2008 bailout. Under the rescue agreement, the government blew away the enterprises’ quarterly profits.
The FHFA said on Tuesday that enterprises would still be allowed to make capital while the suspended policies were being reviewed.
The move received instant praise from Democrats. Senate Banking President Sherrod Brown said past changes were “untenable” and welcomed the suspension to ensure “we don’t inadvertently restrict access to safe, affordable housing for homeowners and renters.”
However, Senator Pat Tommy, the senior Republican on the banking panel, warned that the changes could run the risk of “heating up an already hot market.”
Under the Trump administration’s plan, Fannie and Freddie will be able to keep their profits and streamline their business to gradually rebuild their capital cushion, which could eventually lead to a spiral out of government control. However, even that plan was envisioned would take years, and still left many legal and policy matters unresolved.
by Pete Schroeder
This News Originally From – The Epoch Times