Fannie Mae and Freddie Mac.
Two big government agencies guiding the housing industry, begun by Congress with distinct and separate missions. Today, they are so alike, I almost hear their sing-song names in cadence as part of the same refrain.
But do we need them both anymore? Does having these two separate agencies serve the home-buying public at all?
Freddie Mac was created by Congress in 1970 with a mission to stabilize the country’s residential mortgage markets and create more opportunities for homeownership and affordable rental housing. Today, Freddie operates under a conservatorship that started four years ago, guided by the Federal Housing Finance Agency.
The agency’s mission today is to lower costs for borrowers and support a recovery of the housing industry. In short, it gives funds to banks to create mortgages and to borrowers through the Making Home Affordable program. Among its current goals: make homeownership more affordable, reduce the number of foreclosures and keep people in their homes.
Fannie Mae, on the other hand, has been around for 70 years. Its mission is to provide access to mortgage credit so Americans can buy homes they can afford or find good rentals. Further language on the Fannie website indicates an awfully similar charge to Freddie’s:
“Fannie Mae is a government-sponsored enterprise chartered by Congress to keep money flowing to mortgage lenders, to help strengthen the U.S. housing and mortgage markets, and to support affordable homeownership…We’re also focused on helping struggling homeowners. By working with our partners, we’re helping families prevent foreclosure and keep their homes whenever possible.”
Um, can you see a difference? Really?
Oh yeah – Freddie Mac was once more rural in focus.
Both agencies are so significantly supported by taxpayers. Originally, they were created to provide housing support and to compete with one another – avoid a monopoly or a megalith.
Today there is no difference whatsoever. Their programs are functionally the same and there is no product development happening. Do we still need these two separate organizations?
The question is rhetorical, of course.
If we had one institution, would it be too big to fail?
Combining these two agencies would eliminate the competitive market influence that these two advisories generate today, right (that’s a joke everyone)? So while having just one GSE might not solve the housing crisis, with the reduction in duplicative overhead there would be more money available to help struggling homeowners that wasn’t just printed on a press at the Treasury.