{"id":6622,"date":"2025-07-03T08:36:42","date_gmt":"2025-07-03T12:36:42","guid":{"rendered":"https:\/\/www.deeds.com\/articles\/?p=6622"},"modified":"2025-07-03T08:36:44","modified_gmt":"2025-07-03T12:36:44","slug":"shakeup-at-freddie-and-fannie-update","status":"publish","type":"post","link":"https:\/\/www.deeds.com\/articles\/shakeup-at-freddie-and-fannie-update\/","title":{"rendered":"Shakeup at Freddie and Fannie: Update"},"content":{"rendered":"\n
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How is that shakeup going so far? When we last checked in on things, new director William Pulte was slashing jobs at the Federal Housing Finance Agency. That\u2019s the umbrella agency for Fannie Mae and Freddie Mac.<\/p>\n\n\n\n

Additionally, Pulte claims to have saved millions of dollars by eliminating programs related to climate effects and diversity. <\/p>\n\n\n\n\n\n\n\n

Warning Calls? They\u2019re Coming From Investment Managers<\/h2>\n\n\n\n

\u201cYou know, a lot of people say that these businesses are worth a certain amount\u201d, Pulte has said. \u201cI think they\u2019re worth way more than what some people are saying.\u201d<\/p>\n\n\n\n

Indeed, calls from the administration to privatize Fannie Mae and Freddie Mac mean the stock prices of both enterprises have shot up. What shareholder wouldn\u2019t love potential profits?<\/p>\n\n\n\n

But the mortgage market could be the loser, warns a major investment management firm. We could all \u201cface higher mortgage rates,” Pimco analysts have written.<\/p>\n\n\n\n

And Pimco is not the only one. JPMorgan speculates that taking Fannie and Freddie out from under government oversight could wind up \u201cworsening the current challenges in housing affordability.”<\/p>\n\n\n\n

Pulte seems to acknowledge that it could keep people with modest incomes sidelined. He says:<\/p>\n\n\n\n

An efficient and well-run Fannie and Freddie is a safe and sound mortgage market, and that includes making sure that we\u2019re lending to people who can afford it.<\/em><\/p>\n\n\n\n

But that\u2019s a chicken-and-egg point. Many could<\/em> afford it, with a boost at the beginning. That\u2019s precisely why the Federal Housing Finance Agency has helpful programs that Pulte has been rolling back or discontinuing, like Fannie Mae\u2019s popular HomeReady\u00ae First for modest-income loan applicants. And \u201ccash-to-close\u201d support from Freddie Mac has uplifted those with no money from their families to chip in.<\/p>\n\n\n\n

In a Privatized Future, Consumers Would Shoulder More Risk<\/h2>\n\n\n\n

Loans backed by Fannie Mae and Freddie Mac<\/a> make up 70% of home mortgages. If their operations are privatized, we\u2019ll no longer have \u201cgovernment-backed loans\u201d braced by federal guarantees. Maybe the worst risk is the possible infiltration of predatory lenders<\/a> into the market.<\/p>\n\n\n\n

Because the guardrails built by the government watchdog known as the Consumer Financial Protection Bureau are being taken down, consumers will have less protections if and when that happens.<\/p>\n\n\n\n

So, how likely is privatization, and when could it happen? Ultimately, \u201cthat will be the boss\u2019s decision,\u201d Pulte says, indicating that the president will call the shots.<\/p>\n\n\n\n

The National Association of Mortgage Underwriters<\/a> (NAMU\u00ae) says privatization momentum is building.<\/p>\n\n\n\n

NAMU notes that housing advocates believe privatization could cause mortgage interest rates to go up, possibly by something like 1%. Clearly, this will make it harder for people to apply for loans and acquire deeds. First-time buyers, and households of modest income, would have the most difficulty. Even access to the tried-and-true 30-year, fixed-rate loan would be at risk.<\/p>\n\n\n\n

Wall Street hedge funds are OK with this. Many have been preparing to profit immensely from the looming change.<\/p>\n\n\n\n

Still, it\u2019s impossible to wave a magic wand and privatize Freddie and Fannie. Existing statutes require the government to jump through regulatory hoops. And politicians would presumably have to show their constituents that they oppose federal moves that would tank the chances of many ordinary people to buy homes. Some senators are pushing back in advance.<\/p>\n\n\n\n

The Big Three Credit Bureaus: Under Review?<\/h2>\n\n\n\n
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Anyone who needs a loan to acquire a deed learns how much influence a credit score has over an approval decision. So there\u2019s a lot of concern over the news that Bill Pulte is performing a \u201cfull-scale review\u201d of Experian, Equifax and TransUnion \u2014 the big three credit bureaus.<\/p>\n\n\n\n

Pulte has also said the federal government wants to address the rising cost of a FICO credit pull.<\/p>\n\n\n\n

The stock value of the credit reporting companies dropped<\/a> after the news.<\/p>\n\n\n\n

Fair Isaac Corp. (FICO) is the source of the commonly used credit score for mortgage applications. Pulte is critical of the related cost increases. This year, credit reporting costs are expected to jump 20% or more since last year. Fair Isaac says its charges make up a very small portion of a buyer\u2019s costs.<\/p>\n\n\n\n

Pulte says to expect scoring changes, too, away from the Classic FICO score. Fannie Mae and Freddie Mac will shift to the FICO 10T and VantageScore 4.0.<\/p>\n\n\n\n

How much will the credit companies be overhauled down the road? How will this impact mortgage applicants? Will it be a net good, or more trouble than it\u2019s worth?<\/p>\n\n\n\n

We\u2019re waiting to see how it all unfolds.<\/p>\n\n\n\n

New Announcement: Crypto to Count for Mortgage Reserves<\/h2>\n\n\n\n

Pulte told Fannie and Freddie to \u201cprepare their businesses to count cryptocurrency as an asset for a mortgage.\u201d Industry experts have mixed responses to the idea of allowing crypto assets to be counted as borrowing power. The key concern is the tendency of many crypto assets to vary widely in value from one day to the next.<\/p>\n\n\n\n

A recent sampling from Scotsman Guide<\/em> shows us a few different reactions:<\/p>\n\n\n\n