Mar 28, 2019

Trump looks to remove Fannie and Freddie from conservatorship

President Trump signed a memorandum on federal housing finance Wednesday that starts the process of removing mortgage guarantors Fannie Mae and Freddie Mac from government oversight.

The backdrop: The two government-sponsored enterprises have been under conservatorship since 2008, when they faced collapse during the subprime mortgage crisis.

What they're saying: "The lack of comprehensive housing finance reform since the financial crisis of 2008 has left taxpayers potentially exposed to future bailouts, and has left the Federal housing finance programs at the Department of Housing and Urban Development potentially overexposed to risk and with outdated operations," the White House said in a statement.

  • California-based asset management firm PIMCO has spoken out strongly against such action in the past, arguing as "one of the largest participants in the mortgage-backed securities (MBS) market," that the government should largely leave the current system in place.

But analysts at Goldman Sachs said in a note Thursday the memo "should have only a limited effect on the housing market."

  • "First, we are somewhat skeptical that sweeping changes will be implemented quickly, as the Treasury and FHFA face some constraints on their authority."
  • "Second, we expect the Trump Administration to proceed cautiously to avoid disrupting the mortgage and housing markets ahead of the 2020 presidential election."

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