The Treasury Department today announced plans to accelerate the winddown of Fannie Mae and Freddie Mac.
Treasury amended terms of its financial backing for the government-sponsored enterprises by prohibiting the companies from retaining profits, building capital and returning to the market in their prior form. The new plan replaces a 10% dividend payment Fannie and Freddie paid to Treasury with a quarterly sweep of every dollar of profit each firm earns going forward.
The Treasury said it is also requiring the GSEs on an annual basis to submit a plan on their actions to reduce taxpayer exposure to mortgage credit risk for their guarantee book business and retained portfolio.
Republicans in Congress have called for an end to the two taxpayer-owned companies, which now own or guarantee about 60 percent of U.S. home loans. Treasury Secretary Timothy F. Geithner has said he will propose a plan to overhaul housing finance that will include dismantling or altering Fannie Mae and McLean, Virginia-based Freddie Mac.
