After several mortgage bailouts a no end to loan defaults insight, it is not unreasonable to ask the question —- Why do we need both Fannie Mae and Freddie Mac? In a recent article in the Huffington Post, a strong recommendation from the editor arose for Fannie Mae and Freddie Mac to clean up their act and merge the two government mortgage giants. The Huffington blog called for a new strategic plan for Fannie and Freddie to find a common goal and merge. The federal government has gotten tangled too deep in this mortgage mess and many believe if they continue it will significantly prolong the recession. The FHA mortgage loan programs have been able to recover so why can’t Fannie and Freddie follow suit?
The Post points out that merging Fannie Mae and Freddie Mac to form “Fannie Mac” is a logical step to shift responsibility to new stockholders. The plan will also return the taxpayers’ subsidies to the Treasury. Both GSEs have similar missions. Most of their loan programs are comparable and the merger is logical. The new Fannie Mac will trim its staff and get rid of highly paid senior and middle management who perform the same functions. The GSEs have one-to-four family, home-lending divisions that buy home loans from banking institutions. They have separate divisions to purchase multifamily loans for rental properties with five units or more. Some of the programs within each division are similar enough to be combined and further reduce the company’s size. These government mortgage companies need to dispose of the dispose of their toxic assets like the loan defaults, and bad credit home loans.
