WASHINGTON – Lawmakers are putting together a plan that would abolish bankrupt Fannie Mae and Freddie Mac and replace them with a new system of government-backed mortgage financing, a leading member of Congress said Friday.
The proposal, alluded to by House Financial Services Chairman Barney Frank, comes as the two mortgage giants are reporting huge losses and have eaten up almost $100 billion of federal bailout funds since they were taken over by the government in September 2009.
"The committee will be recommending abolishing Fannie Mae and Freddie Mac in their current form and coming up with a whole new system of housing finance," said Frank, during a committee hearing Friday. "That's the approach, rather than a piecemeal one."
Frank said no decision has been made about what future model he will propose, but that it's important for the government to continue to play a role in fostering housing affordability.
The two government sponsored enterprises play an important role for credit unions and community banks by buying as much as two-thirds of all residential mortgages, then selling them on the secondary market. Both companies have a deep relationship with credit unions, with Freddie Mac marketing its services through a financial deal with CUNA and Fannie Mae through NAFCU.
