With mortgage giants Fannie Mae and Freddie Mac still under federal control and Congress unlikely to pass legislation either ending or better defining the government's conservatorship any time soon, calls for the executive branch to take unilateral action are growing.
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President George W. Bush put the two agencies under control of the Federal Housing Finance Agency in 2008 following a $187B bailout to stabilize the housing market in the midst of the Great Recession. Since then, Fannie and Freddie have performed well, paying the government back all of the bailout money plus an additional $80B, giving rise to questions over whether they should re-privatize, Commercial Observer reports.
So far, all proposals have fallen short, which Walker & Dunlop CEO Willy Walker attributes to them being "way too complicated." Experts disagree on whether or not federal control has been beneficial for affordable housing, and due to the FHFA's ad hoc approach to paying off investors, Commercial Observer reports that support for some sort of permanent resolution is unanimous.
Without a defined path forward, the door is open for intervention from the FHFA and the Treasury Department — and by proxy, the president. Should the Trump administration choose to end federal guarantees for Freddie and Fannie loans, Freddie Mac multifamily head David Brickman told Commercial Observer that up to $140B in multifamily mortgages would be affected.
Such a large decrease in federal funding for the mortgage agencies would destabilize the multifamily industry nationally, Brickman said, and a representative from Moody's emphasized that the system is performing well as is. Among the biggest fears in the industry with respect to the mortgage giants is regarding the potential effect of a sudden change from the Trump administration.
“Anything that’s done ad hoc or very abruptly is going to create a lot of anxiety,” Dekel Capital founder Shlomi Ronen told Commercial Observer. “That will impact pricing.”
FHFA Director Melvin Watt's term ends early next year, at which point Trump will have the opportunity to nominate his replacement.
