The future of Fannie & Freddie under Trump
By Mitchell Hartman
By many measures, the U.S. housing market is the strongest it’s been since the lead-up to the Great Recession. Home prices have returned to pre-recession levels nationwide. The foreclosure rate has fallen significantly. Mortgage rates are still low by historical standards…. “Both Fannie and Freddie were set up to ensure Americans had access to the lowest-possible-cost 30-year fixed-rate mortgages,” said Karen Petrou, managing partner at Federal Financial Analytics in Washington, D.C. Those mortgages carried an “implicit” guarantee from the GSEs, said Petrou: specifically, that investors would be made whole if borrowers didn’t pay, and the mortgages that the GSEs backed went into default. …Petrou said that at that point, the GSEs’ “implicit” guarantee became “effective” to investors in mortgage-backed securities, a situation that persists today: “So that if anything goes wrong in the economy or in their housing book, we as taxpayers are back on the hook,” she said.