Fannie, Freddie Slump After Mnuchin Rules Out Freeing Companies (What Will Biden Do?)

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by confoundedinterest17

The question about Fannie Mae’s and Freddie Mac’s futures is solved: nothing. They are remaining in conservatorship under Mark Calabria and FHFA.

(Bloomberg) -By Joe Light- Fannie Mae and Freddie Mac plunged Tuesday after Treasury Secretary Steven Mnuchin said he’s all but ruled out letting them exit U.S. control before he steps down, leaving it to the Biden administration to decide the fates of the mortgage giants.

In a Wall Street Journal interview, Mnuchin said he’s not going to pursue any actions that put taxpayers at risk or limit consumers’ access to home loans. His decision prevents a major policy change in the last days of the Trump administration that risked disrupting the $10 trillion mortgage market.

Because of the stakes involved, freeing Fannie and Freddie before President-elect Joseph Biden’s Jan. 20 inauguration has long been considered a long shot. But it’s an approach that Federal Housing Finance Agency Director Mark Calabria, the companies’ regulator, has been pushing for behind the scenes. The agreements that provide the companies with government support prevent them from leaving federal control without the Treasury Department’s sign-off.

Fannie fell 15% to $2.33 at 9:37 am in New York trading, while Freddie also slipped 15% to $2.29. Fannie has slumped 25% this year and Freddie has declined 24%.

Mnuchin’s decision means he will fall short of a goal he pledged to accomplish relatively quickly just days after President Donald Trump’s2016 election win. But fully privatizing Fannie and Freddie proved more complicated than the Treasury secretary might have assumed. It also got sidetracked by more pressing issues, like pushing Trump’s tax cut through Congress and responding to the Covid-19 fueled economic downturn.

Speaking to reporters last week, Mnuchin described Fannie and Freddie as “the one area I feel like we didn’t make enough progress.”

Bankrate’s 30Y rate is higher than the US Government 10Y yield.

But what will Biden do? Probably nothing.




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