AgentMortgage

New operating models proposed for Fannie Mae

Tightened regulation competes with privatization

(This is Part 2 of a two-part series. See Part 1: What is all the fuss about Fannie Mae?) Last week I indicated that accounting misdeeds by Fannie Mae had stimulated discussion of the controversial role of Fannie and its smaller sister agency, Freddie Mac, in the U.S. housing finance system. John Q Public as borrower benefits from the agencies, which reduce interest rates on the loans they buy by .25 percent to .375 percent. John Q Public as taxpayer, however, will be on the hook if the agencies encounter such serious financial problems down the road that they cannot meet their obligations without government help. This article is about John Q Public as citizen, who seeks the best possible way to protect taxpayers while minimizing hurt to borrowers. The agencies themselves take the position that nothing need be done because they will keep themselves safe and sound. In contrast, most informed observers outside the agencies opt either for stronger regulatory control or for full privati...