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Response to Tansy_Gold (Original post)

Mon Mar 25, 2013, 07:57 AM

20. Fannie, Freddie to start new securitization firm, regulator says

http://www.reuters.com/article/2013/03/04/us-usa-housing-idUSBRE92318O20130304

Fannie Mae and Freddie Mac will build a new joint company for securitizing home loans as a stepping stone toward shrinking the government's role in the mortgage market, the regulator of the U.S. government-controlled firms said on Monday.

"The overarching goal is to create something of value that could either be sold or used by policymakers as a foundational element of the mortgage market of the future," Edward DeMarco, acting director of the Federal Housing Finance Agency, told the National Association for Business Economics.


Fannie Mae and Freddie Mac, which were bailed out by the government in 2008, help finance about two-thirds of new U.S. home loans. DeMarco is seeking to shrink their footprint and reduce risks to the taxpayers that support the mortgage giants. Since they were seized by the government, the companies have drawn nearly $190 billion from the U.S. Treasury to stay afloat. By creating a new securitization company, FHFA intends to pave the way for a single securitization platform and force Fannie Mae and Freddie Mac to abandon their separate systems. The aim is to shrink the role the two government-sponsored enterprises play in the housing system in the absence of legislation from Congress or direction from the Obama administration on their future.

DeMarco said the goal is to build a single infrastructure to support the mortgage credit business. The new company will be structured as a joint venture that is owned by Fannie Mae and Freddie Mac, DeMarco told reporters on a conference call to discuss FHFA's plans. He said the new joint venture is not expected to begin securitizing loans next year. Instead, the focus will be on creating the business and hiring staff. The company will have a separate chief executive and board. DeMarco expects Congress will ultimately decide how the securitization platform is operated and whether it should be privatized.

"We are on a path to replace the outdated proprietary operational systems of Fannie and Freddie," DeMarco told reporters. "It could be turned to some form of a market utility."

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