The acting director of the Federal Housing Finance Agency (FHFA) says that the government’s two mortgage entities, Fannie Mae and Freddie Mac, will partner to launch a separate organization, creating a new home loan securitization company.
According to Edward DeMarco, the new entity will pressure Fannie Mae and Freddie Mac drop their separate mortgage securitization systems and ultimately reduce the U.S. government’s presence in the mortgage market, Reuters noted.
The new entity will not start securitizing home loans until 2014. It will be launched as a joint venture, owned by both Freddie Mac and Fannie Mae, with a separate management structure. Congress will make the final decision on how the new entity operates and the ultimate fate of Fannie Mae and Freddie Mac.
DeMarco noted that he expects to reduce Fannie Mae and Freddie Mac’s multi-family home loan business by 10% this year.
Both entities had to be bailed out by the U.S. government after the collapse of the mortgage market in 2008, receiving a total of about $190 billion from the U.S. Treasury.