Boston, MA 06/23/2014 (wallstreetpr) – Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) or popularly known as Fannie Mae, is one of the two government-controlled mortgage giants in the U.S. The other giant is Freddie Mac. The two companies, which operate like a duopoly of the U.S. mortgage market, had to receive federal bailout at the height of the financial crisis in 2008 so as to survive.
The companies have survived, yes, but there has been heated debate about their position in the U.S. mortgage market today. First of all, there have been calls that the government should turn the companies to private hands because they no longer make losses. The companies now make profits that are entirely swept away by the government and private investors believe that can also share in the gains.
In addition to the quest to bring back Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac into private hands, there have also been calls to replace the two mortgage institutions with an entity or mortgage system.
It seems the nominee to the office of Department of Housing and Urban Development, Julian Castro, is buying the idea to do away with the two mortgage companies.
Not serving America
According Castro, Fannie Mae and Freddie Mac are no longer serving Americans well in the current housing system. As such, if confirmed, he told the Senate Banking Committee that he would seek to do away with the two mortgage giants.
Housing appears to lag in the U.S. economic recovery and reforming the mortgage system is expected to lift the performance of the sector. It remains to be seen how far Castro goes with his war against Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac, if confirmed as widely expected.
Wind down challenge
Nonetheless, it is worth noting that a Senate committee last month faced opposition while trying to wind down the two mortgage giants. The opposition fears hinge on the fact that winding down the institutions will drive up lending costs, which in term will give too much control of mortgages to the big banks.
Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac received $187.5 billion in federal bailout, and the government has recovered more than that in dividends.