U.S. suspends Trump's plan to exit Fannie and Freddie

U.S. suspends Trump's plan to exit Fannie and Freddie

WASHINGTON Reuters: The U.S. Treasury Department said on Tuesday that it had suspended moves to the government's stake in housing giants Fannie Mae and Freddie Mac imposed in the final days of Trump Administration.

Those changes are aimed at banning the agencies' ability to back certain types of mortgages, including on second homes, multifamily houses and families purchased with higher risk loans, after the Trump administration directed the pair to reduce their footprint in the housing market.

The Federal Housing Finance Agency, which regulates the pair, is reviewing those changes and consulting with Treasury on other possible changes.

The suspension effectively freezes changes put in place in the final days of Trump administration. The then-Treasury Secretary had tried to draw up a blueprint for the exit from government control of Fannie and Freddie.

In January 2020 the Treasury Department announced it had modified its stake in the pair, including allowing them to retain profits in exchange for a larger government stake in the enterprises.

However, housing advocates worried it could undermine the enterprise's core mission of making housing more affordable.

The pair guarantee over half of all U.S. mortgages have been under government control since 2008 bailout. Under the rescue deal, the government swept up the quarterly profits of the companies.

FHFA said on Tuesday that the enterprises will still be allowed to build capital while the suspended policies are under review.

The move was met with quick praise from Democrats. Senate Banking Chairman Sherrod Brown said the previous changes were haphazard and welcomed the suspension to ensure we do not unintentionally restrict access to affordable housing for homeowners and renters. However, Senator Pat Toomey, the senior Republican on the banking committee, warned that changes could risk overheating an already-hot market. Under the Trump administration's plan, Fannie and Freddie would have been able to preserve their profits and streamline their business in a bid to slowly rebuild their capital cushions, which could eventually lead to an exit from government control. However, this plan still took years to implement and left many legal and policy matters unresolved.