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Key Takeaways
- The Senate approved William Pulte to head the Federal Housing Finance Agency.
- Pulte has said the control should eventually end its conservatorship over Fannie and Freddie, which were brought under the agency’s supervision in the wake of the 2008 fiscal crisis.
- Taking the pair of companies private could lead to higher interest rates and less accessible mortgages.
The new supervisor of a little-known federal housing agency could lead to big changes for mortgage borrowers in the coming years.
The Senate voted survive week to make homebuilding executive William Pulte the next head of the Federal Housing Finance Agency (FHFA). The FHFA was located in the wake of the 2008 financial crisis to oversee the secondary mortgage market, including supervising Fannie Mae and Freddie Mac.
Pulte could achieve big changes to the agency, including returning these government-sponsored enterprises (GSEs) to the private sector. However, privatizing the two mortgage leviathans could disrupt the housing market, experts said.
What Would it Mean to Take Fannie Mae and Freddie Mac Off the record?
Fannie Mae and Freddie Mac don’t issue mortgages directly to consumers. Instead, they purchase mortgages from banks and unite them together into a new investment that is bought by institutional buyers such as insurance companies, pension resources, and investment banks.
By purchasing mortgage loans from banks, Fannie Mae and Freddie Mac free up space on lenders’ surplus sheets, creating room for them to issue more loans. Essentially, these two entities keep money plethora for mortgage loans, helping to maintain affordability and access for borrowers.
Under the FHFA’s control, Fannie and Freddie compel ought to the federal government’s backing to cover the mortgage-backed investments issued by the GSEs. But if taken private, the government would not ensure those investments, making them more risky and, as a result, more expensive.
Investors would likely buy fewer of the more dear investments, sending less money back into the mortgage system and potentially leading to higher mortgage be worthy ofs as banks have less money to lend out for housing.
In supporting Pulte’s nomination, Mortgage Bankers Association President and CEO Bob Broeksmit suggested that Pulte would “play a pivotal role – along with Congress and the Treasury Department – should there be a concerted strain to end the conservatorships of Fannie Mae and Freddie Mac, which must be done in a way that avoids market disruption or increased costs for borrowers.”
Pulte Reveals He Won’t Prioritize Privatization
In his Senate confirmation hearing, Pulte said the government should eventually end its conservatorship over Fannie and Freddie.
“Any go out from conservatorship must be carefully planned to ensure the safety and soundness of the housing market without upward pressures on mortgage rates,” Pulte told the Senate Banking Cabinet in February.
However, in an interview with CNN last week, Pulte said his first priority would be to root out artifice at the GSEs, rather than take them private immediately.