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A $4 Trillion Risk Tied to Freeing Fannie & Freddie Could Hurt U.S. Homebuyers

“Conservatorship is safe. An explicit guarantee is safe. Keeping Fannie and Freddie as they are and privatizing them is a dangerous experiment."

By Austin Weinstein | June 14, 2019 at 09:15 AM
Fannie Mae Headquarters Fannie Mae headquarters. (Source: Shutterstock)

The Trump Administration’s urgency to free Fannie Mae and Freddie Mac from federal control has some on Wall Street worried that it might happen without the U.S. government providing an explicit backstop of the companies’ $4.7 trillion of mortgage securities.

Credit rating companies, financial firms and even real estate agents claim that such a move would be a disaster. They’re warning that ending Fannie and Freddie’s conservatorships absent a clear guarantee of their securities might prompt big asset managers to curtail their bond buying. That in turn could dry up some of the financing that keeps the mortgage market humming, making it harder and more expensive for consumers to get home loans, they say.

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