WASHINGTON — Keeping Fannie Mae and Freddie Mac in business will cost taxpayers billions. But getting the federal government out of the mortgage business would cost homebuyers dearly, in the form of higher interest rates.
The Obama administration will begin tackling this dilemma Aug. 17 at a public conference on the future of the mortgage system. Fannie and Freddie lost a combined $9 billion in the April-to-June quarter and have needed more than $148 billion to stay afloat since the government rescued them nearly two years ago.
Figuring out what to do with Fannie and Freddie could take years and involves a more difficult question: How much should the government do to subsidize the housing market? The government has helped make mortgages attractive to Americans for decades with a range of policies, from allowing homeowners to deduct mortgage-interest payments to backing loans that make long-term fixed- rate mortgages widely available.
Now, Fannie and Freddie are facing scrutiny for the billions that taxpayers have covered for the bad loans made during the housing boom. And the administration and Congress are under pressure to address Fannie and Freddie’s role that contributed to the mortgage crisis after leaving that out of the broader financial regulatory overhaul.
Monday, Freddie said it lost $6 billion, or $1.85 per share, in the April-to-June period. The company lost $840 million, or 26 cents a share, in the same quarter last year. And it asked for an additional $1.8 billion from the federal government, bringing its total request to $63.1 billion.
There are numerous ways to restructure the mortgage system, ranging from a fully privatized system to one totally controlled by the government.
