Trump administration officials and Democratic senators clashed over whether the plan for Fannie Mae and Freddie Mac would raise home borrowing costs and neglect lower-income homeowners.
Trump administration officials on Tuesday defended their plan for ending government control of mortgage finance giants Fannie Mae and Freddie Mac, clashing with Democratic senators on whether the change would raise home borrowing costs and neglect lower-income homeowners.
Fannie and Freddie combined guarantee roughly half of the $10-trillion U.S. home loan market. The companies don’t make home loans. Rather, they buy the loans from banks and other lenders and bundle them into securities, guarantee them against default and sell them to Wall Street investors.Calabria said Fannie and Freddie’s capital must be bulked up “to match their risk profiles” and avoid another bailout.
Mnuchin acknowledged that for prices of 30-year mortgages to remain close to current market levels, some level of government support would be needed. He said Congress should authorize an explicit, paid-for guarantee “backed by the full faith and credit of the federal government” for qualified mortgages. The guarantee also should be available to competitors of Fannie and Freddie as mortgage financers, he said.
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