A plan to return Fannie Mae and Freddie Mac to private-shareholder ownership could be released as early as next month, The Wall Street Journal reports. The plan is expected to ensure the firms have adequate capital to absorb loan losses in a future housing slump, putting the GSEs on a sound footing before returning to private hands.
According to WSJ, the plan was originally expected earlier this summer, but was delayed in part due to revisions from the Department of Housing and Urban Development and the Treasury. Sources state that privatizing Fannie and Freddie would likely take several years and would involve allowing the firms to retain earnings and raise tens of billions of dollars from investors. Reuters reported earlier this year that the U.S. Treasury is dealing with several other issues, putting the plan for the GSEs on hold for now.
According to Federal Housing Finance Administration (FHFA) Director Mark Calabria, he hopes Fannie and Freddie will have exited, or will be ready to exit, conservatorship before his term ends in 2024. Calabria told Reuters that he is not operating toward a hard deadline.
“That’s my time horizon,” he said. “I’m under no expectation to try to get all this done. ... So if in four years, nine months they’re not out of conservatorship, I’m not pushing them out.”
Calabria stated that Treasury Secretary Steven Mnuchin is currently “juggling a number of balls,” while Craig Phillips, Mnuchin’s adviser who had been closely involved in the reform plan, also left in June.
Additionally, Calabria stated that the Treasury will back some form of government guarantee for Fannie and Freddie in the report, and notes that the government does not have forever to overhaul them and needs to progress while the housing market remains stable.
“The market looks pretty strong now, so that to me is the time when we want to make real repairs,” he said.