Trump calls Fannie, Freddie a 'pretty urgent problem'

WASHINGTON — President Trump said his administration is exploring different alternatives to end the conservatorship of the mortgage giants Fannie Mae and Freddie Mac, calling the government-sponsored enterprises a “pretty urgent problem.”

“More than a decade after the financial crisis, Fannie Mae and Freddie Mac are still in conservatorship,” Trump said speaking Friday at a National Association of Realtors event. “Fannie and Freddie still dominate … with no real competition from the private sector, and the taxpayers are still on the hook if another crisis should happen, and this is a pretty urgent problem.”

Although Trump emphasized that the GSEs are “doing a lot better than they have been” and are “well-managed,” he also highlighted a need for a system that “welcomes the private sector and competition, protects taxpayers and preserves homeownership for future generations to come.”

Andrew Harrer/Bloomberg

He mentioned his March directive to the Treasury Department and the Department of Housing and Urban Development that asked the agencies to develop administrative and legislative plans for reforming the housing finance system, including resolving the conservatorship of Fannie and Freddie.

“We will consider taking administrative actions to modernize our housing programs and to ensure more affordable housing to get rid of ridiculous regulations,” Trump said.

Wall Street figures with “incredible talent” have been consulted on developing a solution, he added.

“We’re looking at different alternatives; we have many geniuses looking at it,” he said. “We’ll figure something out.”

Mark Calabria, the recently confirmed director of the Federal Housing Finance Agency, has said he expects the reports from Treasury and HUD to be completed during the summer. Once those reports are finalized, he will begin discussing changes to the preferred stock purchase agreements of the GSEs with Treasury with the goal of allowing Fannie and Freddie to hold more capital. Currently, both companies direct most of their profits to Treasury.

“To me, the GSEs may be able to retain earnings, may be able to build capital, but I think it will absolutely require a conversation and an agreement between the FHFA and Treasury on what are other avenues for raising capital,” Calabria told American Banker in April.

Calabria has said that Fannie and Freddie will have to meet “mile markers,” such as raising a certain amount of capital, as prerequisites to exiting conservatorship.