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Pulling Fannie and Freddie out of conservatorship won’t be easy but should include options for … More backing other kinds of debt like loans for cooperative housing (Photo credit should read PAUL J. RICHARDS/AFP via Getty Images) AFP via Getty Images There is an article in Politico that is compelling for its headline and subhead: Trump has a plan to remake the housing-finance system. It’s baffling to many lawmakers and experts. And the subhead further explains that, “The question of what to do with Fannie and Freddie, the two dominant mortgage financiers, has bedeviled policymakers for decades.” When I read this and all I could think is, “Well, yeah.” There just aren’t that many people that understand how the Government Sponsored Enterprises, Federal National Mortgage Association, Fannie, and the Federal Home Loan Mortgage Corporation, Freddie work in the first place nor the conservatorship that began in 2008. Mix in Donald Trump and the best word is “baffled.” Is there a simple explanation and idea about where to go next with mortgage finance? For my own benefit, I ran through the simplest explanation I could give myself and share with others. The two entities, Fannie and Freddie are Government Sponsored Entities (GSEs) because they were created by the federal government. They are private, but because they are creatures of a federal directive, they function like a quasi-governmental entity. The purpose behind creating them, and GSEs is to increase the availability of credit, especially among consumers. Another example of a GSE is Sallie Mae, and entity created to increase access to loans for college education. How do GSEs increase consumer borrowing for housing? They aren’t banks. That is, they don’t directly loan money, but they back loans, meaning that if a loan goes bad, the GSEs will cover the bad debt. But…

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Filed under: News - @ July 7, 2025 2:25 pm