(Bloomberg) — The government agencies that control mortgage giants Fannie Mae and Freddie Mac amended the terms of the US Treasury’s stake in those entities, giving back the department’s right to block any plan to release the pair from government supervision.
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“The agreement restores Treasury’s previous right to consent to a release of the GSEs from conservatorship,” the Treasury Department and Federal Housing Finance Agency said Thursday in a joint statement. Fannie and Freddie are known as government-sponsored enterprises, or GSEs.
The agreement, the agencies said, was designed to “help ensure that the eventual release of the GSEs from conservatorship will be orderly and to reflect certain existing practices.”
The Treasury also committed to seek public comment prior to signing off on any release of the two entities from their current arrangement.
The announcement comes less than three weeks before Donald Trump is scheduled to be sworn back into office as president.
A senior Biden administration official, speaking on condition of anonymity, said the new agreement wouldn’t prevent a future administration from taking action with respect to Fannie and Freddie, but it would set expectations for market participants and for Congress on how an end to the conservatorship might proceed.
Once private entities, Fannie and Freddie were formed to provide more Americans access to housing by effectively guaranteeing mortgages. The two came close to collapse during the 2008-2009 financial crisis beneath the weight of defaulted mortgages. The Treasury bailed the pair out and they were placed into conservatorship, under the FHFA.
In return for its cash injection, the Treasury received senior preferred shares in both Fannie and Freddie.
Thursday’s statement said the new agreement does not affect the GSEs’ capital retention or dividend payments under the senior preferred shares issued to the Treasury.
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