Group Suggests Eliminating Fannie and Freddie

Fannie Mae and Freddie Mac should be eliminated as part of a major overhaul of the housing-finance system, according the Bipartisan Policy Center, a Washington, D.C.-based think tank. The group said that Fannie and Freddie should eventually be replaced by a government corporation, with its primary role to be providing a “catastrophic” guarantee on select mortgage-backed securities. The government guarantee would be in force only after private entities had exhausted their capital. It was also recommended that there be a decrease in the FHA’s role, by reducing loan limits. In addition, the report stated that stricter lending standards and uncertainty on new mortgage rules have harmed the housing market’s recovery and that federal officials should develop a plan to ease credit.

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