The Federal National Mortgage Assctn Fnni Me (OTCMKTS:FNMA) landed into crisis era with Freddie Mac or Federal Home Loan Mortgage Corporation (FHLMC) and since then everything changed for the politicians and investors. Everyone is hoping for the solution from the newly elected President, Trump, as he would pick up the Treasury secretary soon. The investors hurt by the opinion of being unfairly treated are now eyeing Trump with hopeful sights. Yet, according to The Wall Street Journal, it is most unlikely that what they demand shall be deemed.
The new proposals laid down before the Washington
From free-market housing finance options to outright government guarantee on mortgages- almost all kinds of proposals have made way to the Washington. No one is guessing the Trump or his government’s views on the Fannie-Freddie debate. But, what the experts are guessing is that the solution will be more practical than ideal.
The Johnson-Crapo bill- Will this help?
There might be a clear or broad majority on a proposal that has earlier made its way there too. Mike Crapo of Idaho, the Republican senator, in 2014, along with Tim Johnson of South Dakota, the Democratic Senator had proposed a bill. This bill received a bipartisan consensus in Senate Banking Committee.
The bill proposed to shut down the companies and creating new securitization platform by transitioning their infrastructure to it. This new securitization platform will have federal guarantees for the mortgage-backed securities that it issues. The agency modelled on Federal Deposit Insurance Corp. shall be responsible for ensuring the same. The bill also proposed that private capital will be infused into the system through outside investors, who in turn, will be paid to carry this risk of first 10% loss on mortgage pools.
Fannie and Freddie running trials of solutions
In order to find a solution, Fannie and Freddie are already looking at this option of risk transferring of mortgage portfolio to the investors from outside. But the plan still doesn’t seem to work fine.
Will Trump find a solution to the Fannie and Freddie crisis? It is for the Trump government to decide.