Who Steps Up in Mortgages After Fannie, Freddie?

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The Administration is counting on the private sector to fill the gap in home lending if it trims the roles of Fannie Mae and Freddie Mac

by Lorraine Woellert and Jody Shenn

Treasury Secretary Timothy Geithner and Housing and Urban Development Secretary Shaun Donovan on Feb. 11 offered three options for shrinking Fannie Mae (FNMA) and Freddie Mac (FMCC), the bailed-out housing finance companies that own or guarantee more than half the nation's mortgage debt. By gradually reducing the dominant positions of Fannie and Freddie, the officials hope to coax private financial firms and bond traders to take on more of the U.S. mortgage market's risk and revive the secondary market for home loans. One government misstep, and a shortage of home loan money could send loan costs soaring and home prices tumbling. "We want to be careful that the process happens in a way that doesn't interfere with or impede the process of repair in the housing market," Geithner said.

Read the full article on Businessweek.com

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