Fannie & Freddie May Be History
Senators, Bob Corker (R-TN) and Mark Warner (D-VA) introduced a bill on June 25th that would eliminate government-sponsored Freddie Mac and Fannie Mae.Â Over a five-year phase out, the institutions would be replaced by a new government reinsurer, a Federal Mortgage Insurance Corp (FMIC).
Originally reported by National Mortgage News, the structure of the FMIC would be similar to the Federal Deposit Insurance Corp, collecting premiums from industry participants and maintaining an insurance fund.Â Only after a â€śsubstantial amountâ€ť of private capital had been exhausted would its backing kick in.Â FMIC would cover a greater share of losses during â€śunusual and exigent circumstanceâ€ť like the one that threatened the housing finance system.Â Under the bill, banks would be required to share losses, unlike Freddie and Fannie which currently package mortgages into securities, guaranteeing 100 payback.Â
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