DeMarco Pushes End to Fannie, Freddie Reliance on Taxpayer Dollars

By Gretchen Wegrich

Fannie Mae and Freddie Mac acting regulator Edward J. DeMarco will meet with the House Financial Services Committee today to ask lawmakers to cut back or eliminate the mortgage market's reliance on taxpayer dollars. 

After being put under conservatorship in 2008 following the collapse of the mortgage market, Fannie Mae and Freddie Mac have required nearly $190 billion in taxpayer-generated aid in order to stay afloat, reported Bloomberg.

Five years later, Fannie's impending profitability is prompting regulators and lawmakers to examine the current model before it becomes entrenched in the US financial system. The question is what will replace Fannie and Freddie before the housing market rebounds and profits soar to elevated levels.

Fannie Mae could soon pour as much as $62 billion into the US Treasury because, as soon as it is profitable, it will be required to count potential tax credits as a portion of its net worth.

"I have been observing a developing 'consensus' among private-market cannot operate without the American taxpayer providing the ultimate credit guarantee for most of the market," DeMarco stated. "That clearly is one outcome, but I do not believe it is the only outcome that can give our country a strong housing finance system. I believe that our country, and its financial system, are stronger than that."

Read the full report from Bloomberg.

Gretchen Wegrich

Gretchen Wegrich is an editor at Lender411. She specializes in mortgage basics, personal finance and green living. She graduated with a bachelor's degree in writing from University of California, San Diego and previously worked at the Santa Cruz Sentinel. Contact her at gretchen@lender411com.