Possible Futures for Fanne Mae & Freddie Mac

The Atlantic looks at three alternatives proposed by a Treasury report on the future of the Government-Sponsored Enterprises (GSEs), Fannie Mae & Freddie Mac.  However the government chooses to proceed, it appears that assistance for low-income borrowers will remain in place, but assistance for higher-income borrowers will be phased out so that the private market will assume more of a role. 

While some have predicted that the end of Fannie Mae and Freddie Mac would lead to the end of low-cost mortgages, there's some evidence that this may not necessarily be so-for example, the existence of jumbo mortgages which are beyond what the GSEs would cover.

From the standpoint of someone who has been closely following the housing finance policy debate for some time, this report is surprisingly aggressive. Even though the Obama administration doesn't take a firm stance on the best specific housing policy framework, it clearly sets the tone for the debate going forward. Any hope that the government would still maintain a full mortgage guarantee for most of the mortgage market may be dead. This will likely frustrate the real estate industry, banking lobbyists, and mortgage bond investors. But it's ultimately pretty good news for taxpayers.

This pretty much ends the hope that the National Affordable Housing Trust Fund could be fully funded by Fannie Mae & Freddie Mac in the future.  The GSEs were the original funding method for the Housing Trust Fund when it was passed, shortly before the collapse of the housing market.