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13
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SENATORS CALL FOR BIG
CHANGES TO GSES
Two senators are drafting legislation that
could potentially break up Fannie Mae and
Freddie Mac, Bloomberg reported recently.
In a bipartisan effort between Sen. Bob
Corker (R-Tennessee) and Sen. Mark Warner
(D-Virginia) that started earlier this year, the
two officials are looking to put an end to the
enterprise's overwhelming command of the
secondary mortgage market and create more
competition. ere have been murmurs of
GSE reform in Washington ever since the
U.S. government acquired the enterprises back
in 2008 after the housing market crash.
How do they plan on increasing
competitiveness in the marketplace? One idea
is to separate Freddie's and Fannie's single-
family businesses from their multifamily ones.
If need be, their single-family businesses could
be broken up even further.
However, this feat might be easier said
than done. According to the Bloomberg
article:
"Breaking up Fannie and Freddie would
face logistical hurdles. In the past, business
separations in other industries have sometimes
fallen along regional lines, but that might not
work for mortgage companies whose viability
depends on a broad geographic footprint.
Other issues a bill might have to address
include how to split up employees, intellectual
property, and what would happen to the
guarantees the companies issue on mortgage-
backed securities during any transition."
ere is the chance the legislation could
fail to get traction in the Senate, as most
members have their sights on more big-
picture legislation, such as healthcare and
tax reform—both of which have gotten off to
rocky starts.
Treasury Secretary Steven Mnuchin has
repeatedly said that he plans to focus on
Freddie Mac's and Fannie Mae's future in
the second half of 2017. Corker and Warner's
joint legislation could be the first step in that
discussion.
