Like a proposed overhaul of the tax system, a reworking of the U.S. mortgage finance system that includes winding down Fannie Mae and Freddie Mac is unlikely to get too far during an election year.

But that doesn’t mean that a proposal to do just that, put forward today by Senate Banking Committee leaders, won’t end up serving as the foundation for action lawmakers could take after the election.

Although Fannie and Freddie are profitable again, there’s general agreement that the way the companies were structured before the housing bust — with company executives and investors reaping big profits while taxpayers shouldered the risk — was unwise.

The plan put forward today would still provide a government backstop, but abolish Fannie and Freddie and replace them with private insurers who would assume the brunt of initial losses on the mortgage securities that finance most home loans.

House Republicans have “a very different view of how GSE reform should proceed,” analysts at Bank of America Merrill Lynch said in a note to clients, MarketWatch’s Ruth Mantell reports.

But at this point, nobody really expects Fannie and Freddie to survive — even investors who have driven the companies’ share prices up 1,200 percent in the last year. Mantell says investors are pinning their hopes on lawsuits against the government challenging 2012 amendments to a bailout agreement, which mandates that all profits the companies make go to the U.S. Treasury. Source: marketwatch.com.

Show Comments Hide Comments

Comments

Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
Success!
Thank you for subscribing to Morning Headlines.
Back to top
We are less than 1 week away from Inman Connect! Get your ticket for $99 before prices go up next week.GET YOUR TICKET×
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription