By the time the media began to reveal the extent of damage major lending institutions had done to the U.S. economy, the names Fannie Mae and Freddie Mac were about as common as Brad and Angelina. Republican legislators in Congress are now ironing out a new plan to more gradually reduce the role of Fannie Mae and Freddie Mac in the home loan industry. The original bill proposed a speedier winding down of the mortgage power of the companies, turning over much of the responsibility to the private sector.
The shift to a more gradual approach is an attempt to gain more cooperation from the White House and also reduce the likelihood of consumers ending up with higher mortgage costs.
Tuesday, Rep. Scott Garrett (R., N.J.), will reveal the bills that will speed up the reduction of Fannie and Freedie’s $1.5 trillion mortgage portfolios, while the other bill would remove their federal affordable-housing goals and eventually increase the fees that the two firms charge lenders.
Generally speaking, the White House seems to view favorably at least some of the ideas proposed in the bills, this after Republicans previously criticized Democrats for excluding Fannie Mae and Freddie Mac from the government’s overhaul of the mortgage system.
Fannie Mae is The Federal National Mortgage Association, and Freddie Mac is The Federal Home Loan Mortgage Corporation. Fannie Mae was originally a government agency, spun off into a public company, and the government created Freddie Mac as a public company to compete with Fannie Mae. As the mortgage crisis grew in the U.S., many banks and other lenders were subjected to quick-response government-regulated overhauls. Freddie and Fannie are responsible for backing most mortgages in the U.S., making the task of phasing them out much more complex.