Senators Elizabeth Warren, Cory Booker, and Chuck Schumer have asked the Trump administration to freeze its plan to sell shares of Fannie Mae (FNMA) and Freddie Mac (FMCC), arguing that more research is needed on whether the move could drive up mortgage rates, according to the Wall Street Journal.
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On Friday, the three senators sent a letter to Federal Housing Finance Agency (FHFA) Director Bill Pulte, urging him to center his effort on housing affordability rather than other areas, such as filing criminal referrals against Fed Governor Lisa Cook. The 30-year fixed-rate mortgage sits at a 10-month low of 6.56% but still remains elevated when compared to recent years, locking prospective buyers out of the market.
Privatizing Fannie and Freddie May Push Mortgage Rates Higher
Right now, if Fannie and Freddie were to experience financial difficulties, the government could step in and provide support. That safety net makes lending to the two government-sponsored entities (GSEs) safer, allowing them to borrow money cheaply while keeping mortgage rates lower.
If Fannie and Freddie were to be privatized, mortgage rates could drift higher if investors believe the government would no longer bail them out. In other words, investors would require a higher return for increased risk, which could equate to a higher mortgage rate.
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