Fannie Mae and Freddie Mac: Implications for Credit Unions

Abstract

This research brief provides an overview of the role of Fannie Mae and Freddie Mac in the housing finance market and provides a framework in which reform options for the two companies can be evaluated. These options include a return to the pre-crisis status quo; a move to redirect Fannie and Freddie income to affordable housing goals; nationalization; and privatization. The research brief evaluates a number of concrete reform proposals through the lens of these four options, including those of Credit Suisse, the Mortgage Bankers Association, the Housing Policy Council of the Financial Services Roundtable, the Center for American Progress and e21.

The research brief also highlights the impact that reform proposals would have on credit unions and other small financial institutions. The brief ultimately concludes that Fannie and Freddie should be privatized, and the benefits that the two companies produce in the residential mortgage market should be maintained through alternative means, including financial regulation, consumer protection legislation and increased subsidies for affordable housing.

Keywords: Fannie, Freddie, secondary mortgage market, housing finance, government-sponsored enterprise, gse, credit unions