The future of Fannie & Freddie under Trump

By many measures, the U.S. housing market is the strongest it’s been since the lead-up to the Great Recession. Home prices have returned to pre-recession levels nationwide. The foreclosure rate has fallen significantly. Mortgage rates are still low by historical standards. And one complicated legacy of the housing bust could finally be dealt with under the incoming Trump administration and Republican Congress: resolving the fate of the so-called “government-sponsored enterprises” (GSEs): Fannie Mae and Freddie Mac. Both were rescued in 2008, at the height of the financial crisis, with hundreds of billions in taxpayer money, which they have now more than repaid to the U.S. Treasury. They are still owned by investors and their stocks are publicly traded. But they remain under government control, and now play a greater role than before the crisis in sustaining real estate sales and providing liquidity to the housing market. The GSEs are New Deal responses to a previous crisis in housing — the Great Depression. At that time, banks were failing, unemployment was soaring, people were losing their homes to foreclosure, or simply abandoning them to look for work elsewhere in the country. The banks that remained open and solvent had limited funds to lend to would-be homebuyers.


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