Fanny and Freddie Not Being Downsized

\r\nAfter inaccurate tax forms were discovered, government lenders Fannie Mae and Freddie Mac were ordered to reduce the size of their mortgage holdings by the end of 2006. However, the House of Representatives has passed a bill to go into effect the beginning of the last quarter that states the two lenders do not have to reduce their holdings. As the companies stand, Fannie Mae and Freddie Mac retain about $1.4 trillion in mortgage portfolios, encouraging the government to allow the retention.\r\n

The Treasury stated that, with the mortgage market slowing in the past six months, now would not be the time for the two lenders to be forced to downsize. Fannie Mae and Freddie Mac together hold or contribute to over 60% of all mortgages in the US; selling parts of their portfolio may cause mortgage rates to boom in an already lagging market. As the November elections inch closer, both sides of the debate have heated up, with critics stating that no one should be above the law and advocates stating that the mortgage industry needs all the help it can get at this point.\r\n