Page 29 - September October 2018 Disruption Report Flip Book

FANNIE MAE AND FREDDIE MAC
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worth sweep” as Fannie and Freddie performed their mandated jobs to protect and serve home ownership during times of financial crisis. And, as was factually obvious in 2009 or 2012 by loan vintage analysis, both have come back strong. Judge Lamberth’s latest ruling should advance the re-IPO of Fannie and Freddie in similar fashion to AIG in 2012. (Letter to Shareholders, Bruce R. Berkowitz, 10/30/18)
“Despite Fairholme’s spin, Lamberth in the same ruling told shareholders that his earlier decision, in which he dismissed all of the shareholders’ claims, including their breach of contract, breach
of fiduciary duty and violation of Delaware and Virginia law arguments, remained,” wrote Inside Mortgage Finance’s Paul Muolo. (Inside Mortgage Finance, Paul Muolo, 10/30/18)
The idea of scaling back Fannie and Freddie administratively without legislative approval is gaining traction, making the mid-term election results even more important in determining their fate moving forward.
“It’s possible that the conservatorship will be unwound over the next year or two regardless of the midterm election outcomes, but if the Democrats take control of the House, they’ll look to build language into the agreement that provides funds for affordable housing, and offers expanded credit provisions for underserved borrowers–both of which Democrats included in the last bipartisan attempt to end the conservatorship a few years ago,” said Rick Sharga, EVP, Carrington Holdings. “The size, scope and specific roles of the two GSEs once out of the conservatorship could also vary wildly depending on whether the Republicans continue to control all three branches of government or the Democrats take back the House and/or Senate.” (DS News, Radhika Ojha, 10/30/18)
Accounting for Fannie Mae and Freddie Mac in the federal budget
The Congressional Budget Office issued an analysis of the accounting treatment for the GSEs
in the federal budget, addressing (i) how federal controls of the GSEs affect their budgetary treatment; (ii) the types of estimates CBO prepares for federal credit programs; and (iii) the use of fair-value accounting for the enterprises. CBO wrote:
• In CBO’s judgment, Fannie Mae and Freddie Mac are effectively part of the government. Hence, in its baseline budget projections for the coming 10 years, CBO accounts for the GSEs’ operations as though they are being conducted by a federal agency. CBO measures the cost
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