U.S. Government Announces Plans to Shrink Fannie Mae & Freddie Mac

CAI National recently released the following communication addressing plans by the U.S. Government to shrink Fannie Mae and Freddie Mac.  It is currently unknown whether, or to what extent, this course of action will impact the financing of mortgages in community associations.

“On August 17th, the U.S. Treasury Department and the Federal Housing Finance Agency (FHFA) announced plans to expedite the wind down of Fannie Mae and Freddie Mac operations. Fannie Mae and Freddie Mac have been instrumental in the development of the community association model of housing. 

Under the terms of the August 17th agreement Fannie Mae and Freddie Mac shall:

 

●Accelerate the reduction of retained mortgage portfolios at an annual rate of 15 percent, which will achieve the target portfolio valuation of $250 billion four years earlier than previously scheduled.

 

●Fannie Mae and Freddie Mac will be required to submit an annual plan to the U.S. Treasury Department on actions to reduce taxpayer exposure to mortgage credit risk for their retained portfolios and mortgage guarantee books of business.

 

●Fannie Mae and Freddie Mac will pay all future earnings to the U.S. government.

 

With this agreement the U.S. Treasury Department and the FHFA ensure that Fannie Mae and Freddie Mac will not exhaust taxpayer resources available to keep the companies afloat. The agreement also underscores the Obama Administration’s commitment to reducing the size and scope of Fannie Mae and Freddie Mac operations.

 

Fannie Mae and Freddie Mac are an important source of mortgage funding for community association homeowners. Without Fannie Mae and Freddie Mac, community associations would not have the broad acceptance in the housing market as these companies were instrumental in establishing lending standards for community association homeowners. CAI will work to ensure that Fannie Mae and Freddie Mac continue to support community associations and that Congress enacts mortgage finance reform legislation that protects association homeowners.”