Obama to Propose Eliminating Fannie Mae, Freddie Mac

[SunSeeker]

14. Thanks for the link. Looks like the point is to prevent future bank bailouts.

From the article:

“The president strongly supports comprehensive housing finance reform that would forever end Fannie Mae and Freddie Mac’s flawed business model that put the American taxpayers on the hook,” Brundage said in an e-mail.

Under the bill, Washington-based Fannie Mae and McLean, Virginia-based Freddie Mac, which package mortgages into securities on which they guarantee 100 percent payment of principal and interest, would be liquidated within five years.

Because the bill would force banks to share the losses from bad mortgages, taxpayers will “know that in the future we won’t have a system where there’s private gains and public losses,” Corker said in the Bloomberg Television interview.

The bill calls for private financiers to hold equity capital of 10 percent of the principal of underlying securities to cover any first loss of the loans. Housing finance participants have been critical of that “first-loss” provision, as it is referred to in the bill, saying it is too big a change from the current system.