There are lots of ideas on what to do with Freddie Mac and Fannie Mae.  Privatize them, get rid of them, merge the two, restructure them. No one though, has really gone as far as the National Association of Realtors. NAR is floating and idea out there that will turn Freddie Mac and Fannie Mae into federally owned nonprofit corporations. The proposal pretty much leaves the two companies intact with some structural changes. It will also keep Freddie and Fannie's core concepts of supporting affordable housing and maintaining large investment portfolios. The proposal will fundamentally change how Washington oversees mortgages and guarantees of mortgages. Right now there is an implied government guarantee on mortgage back securities. This implied guarantee is what has allowed Freddie and Fannie to borrow cheap, often foreign, monies. That current implied guarantee will change under this NAR proposal to much more detailed, clearly stated guarantee of these same mortgage back securities. The proposal goes on to say that the two companies should have to reinvest their profits so they could build capital reserves, be self funded and continue to lend in tough economic times.

Let's face it .  Full disclosure.  The National Association of Realtors is a political action committee that has a vested interest in keeping the buying and selling of real estate at as fast and frenzied state as possible.  The current system has worked for NAR in the past and they like it overall.  They have a vested interest in the low cost 30 year fixed loans that Freddie and Fannie have helped provide over the years.  You just have to keep that in mind.

Whether you like this idea or hate it will probably depend on your own personal core ideals of big government vs. small government.  Proponents who like the idea will point to all the people that Freddie and Fannie have helped in the past.  Restructuring them and reorganizing them to more effective and efficient companies will help them survive in the future.  Having an stated US government guarantee could help keep low cost  low interest loans flowing into the market.  Making them self sufficient would tamp down fears of people who fear that they are just money pits that US citizens are going to have to bail out time and again.

People who oppose this idea will point out that the current system has failed in recent years.  The same ideals that allow for affordable housing loans were stretched , and shall we say slightly abused.  Freddie and Fannie are in economic trouble.  They currently guarantee about five trillion of the eleven trillion dollars in US mortgages and may need another bailout soon.  Both the companies came under fire for already needing and taking a 100+ billion dollar bailout then bonusing top executives millions of dollars.  Some also believe that we don't need anything like Freddie and Fannie to guarantee loans.  The banks will do it without them and be pickier about to whom they loans.  There's also the worry about the government getting too "big brother" and politicians being able to tell the people what they can and should be allowed to buy for housing.  Will it lead to, or is the concept, socialized housing?    This plan could also constitute a huge shift of money and power to the federal government.  Since the government will be guaranteeing the loans they will be able to set the rules and parameters of the loans.  They already do that with FHA and VA loans.  Controlling the loans through the guarantees could lead to massive wealth and corruption in the ranks of the politicians and overseers of the system.  You get the idea.

I don't think this plan will actually survive in this political climate.  But either way, if you like or dislike the concept,  you should let your congressman know.  It could make a really huge change in our lives.