Professional Home Staging and Photography Blog: Mortgage giants Fannie Mae and Freddie Mac on death row?

Mortgage giants Fannie Mae and Freddie Mac on death row?

NW house, Las Vegas, NWHouse honcho Barney Frank feels that it's time to let these two GSEs, the home loan superstars that have for a long time dominated the secondary mortgage market, expire. Instead of trying to fix them, they should be strapped down and given some liquid that puts them to sleep.  

Fannie Mae and Freddie Mac, in all honesty, have had their problems lately. Years ago they were rocked by management shenanigans, including cooking the books to allow top leaders pocket fatter bonuses. Sounds familiar? More recently they have suffered heavy losses as the real estate market flew right over the cliff and were eventually taken over by the government. But just about every mortgage lender or investor out there is taking it to the chin now, so it's quite common these days.

Regardless, debate has been underway for a while about the future of these important mortgage organizations and now it may be coming to a head. One way or another. There is quite a bit of support in Washington and elsewhere for their outright dismissal. Frank wants nothing less than wipe them off the face of the mortgage scene and bring in a brand new replacement structure. Okay. Perhaps everyone ought to take a deep breath and think this thing through before rushing into anything totally new.

See, the management problems occurred because the governmental oversight by HUD and the Congress was lax. The housing market was doing just peachy early in the decade, actually too peachy, so everybody basically left them alone to knit their little accounting schemes. When the cat is away the mice dance on the table. Tighter supervision would've kept Fannie Mae and Freddie Mac on the straight road. This is hardly a good reason to dismantle these firms. Perhaps the oversight segment should be looked at, and possibly replaced.

Same thing goes for the recent losses. Some realistic red flags were raised by industry experts as the real estate market accelerated toward the pinnacle, but these GSE's, like most private mortgage lenders, ignored sound lending practices and are now paying the price. Like the entire nation is. Again, the oversight was inadequate, missing the boat.

Fannie Mae and Freddie Mac do need some changes to meet requirements of today's difficult housing and mortgage markets. They don't have to be boarded up.  Combining might be the ticket, bring them under one roof. Even if they were tossed by the wayside, the spanking new entity would still need a strong oversight function to do any better. That's the key.


Provided by: 

Esko Kiuru
Mortgage, real estate and apartment industry analyst - syndicated mortgage, housing and property management blog
My cell: 702-499-1006

Comment balloon 53 commentsEsko Kiuru • January 25 2010 11:11PM


Esko, two thoughts. Barney Frank's significant other was working at Fannie or Freddie during the cook-the-books hey day. You'll never hear about that in the mainstream media. I think that was a huge conflict of interest for Mr. Frank. Second, "throwing the baby out with the bath water" is a dumb idea. Just because they're having problems is no reason to abolish them. Like you said, almost every financial institution has had some problems lately.

Posted by Sharon Alters, Realtor - Homes for Sale Fleming Island FL (Coldwell Banker Vanguard Realty - 904-673-2308) about 8 years ago

The question is:

Who's going to guarantee the secondary market ? No 'Tandem Plan', no insurance, no investors, no replenished funds for the banks to make new loans. The banks funds will just dry up like a dusty, dry, recessed lake bed.

Posted by David Saks about 8 years ago


We do not need another 2000 page new design for the secondary market.  I'm not sure they have any idea how to avoid the problems that the gov. created.

Posted by Tim Lorenz, 949 874-2247 (TIM LORENZ - Elite Home Sales Team) about 8 years ago

What would be the unintended consequences.


Posted by Bonner Thomason, CRS, ABR, GRI, e-Pro (Keller Williams Realty) about 8 years ago

WARNING:  To folks who would like to see Fannie and Freddie eliminated, BE CAREFUL WHAT YOU ASK FOR!

Barney Frank doesn't want to let the GSEs go.  He wants to sweep them under the rug.  That way, there would be no chance of himself and his cronies implicated in the perfidy that let Franklin Raines get by with his shenanigans.  Nor would be public see the extent to which Fannie and Freddie were in bed with members of Congress and Wall Street.

The housing industry needs Fannie and Freddie more than at any time in the past.  Unless the housing industry wants consumers to rely on portfolio lenders, they better hope Fannie and Freddie stick around. 

Lenders are trying their best to shed their portfolios as we speak.  They accept few applications that can't be sold to Fannie and Freddie. 

I, for one, do NOT want the present administration to create a replacement for the GFEs.  Nor do I want the present Congress to do so. 

THIS IS AN IMPORTANT POST.  It needs to be read.


Posted by Lenn Harley, Real Estate Broker - Virginia & Maryland (Lenn Harley,, MD & VA Homes and Real Estate) about 8 years ago

I would also suggest that a common practice in Washington politics is jawboning. You make extreme statements in order to affect a change at the heart of the issue. In DC to get atttention you need a very large hammer.

Posted by Joe Pryor, REALTOR® - Oklahoma Investment Properties (The Virtual Real Estate Team) about 8 years ago

Barney Frank? HE drove the getaway car in the crime that hurt the GFEs and it is ironic that this would be his solution. No, we should not reinvent the wheel, just fix the problems and keep the system that worked fine for decades until the dozing, complicit government let the inmates run the asylum. 

Posted by J. Philip Faranda, Broker-Owner (J. Philip Faranda (J. Philip R.E. LLC) Westchester County NY) about 8 years ago

I was going to add something to the discussion about Barney Frank, but somehow I think I better not.

But I will say this ... If Fannie Mae and Freddie Mac go, then you can kiss the mortgage and real industries goodbye.

Posted by Lew Corcoran, ASP®, Home Stager & Real Estate Photographer (Scena Home Staging & Decora Photography) about 8 years ago

Attempting to repair the damage by cutting away the only chance to revive the real estate industry is not in my opinion a good thing.

We need these programs more than ever . .and if they ever went away, we will be left in the water on a boat with no paddles and no motor.

Frightening thought 

Posted by Fernando Herboso - Broker for Maxus Realty Group, 301-246-0001 Serving Maryland, DC and Northern VA (Maxus Realty Group - Broker 301-246-0001) about 8 years ago

Why aren't BOA and Wachovia being forced into bankruptcy, too?  It's not only the companies that need to face the chopping block for what they did to the US housing market, it's also the top management that needs to GO.  

I'm waiting for people to start rioting in the streets over the rape of America that's going on before our very eyes.  Eventually, when people are out of work long enough and cannot feed their families, there will be civil unrest.


Scott Miller, Realty Associates, Boca Raton, FL  

Posted by Scott Miller, (Realty Associates!) about 8 years ago

maybe it's time for barney frank to expire, ops i mean retire, i think.

Posted by Jay Beckingham, "I love first time homebuyers" (Fairway Independent Mortgage Company) about 8 years ago

Hi Jay,  Just took the words out of my mouth.  Who looked the other way when this problem was brought up in 2002?  Barney Frank.  Time to let his political career expire!

Posted by Geoff ONeill (John L. Scott Medford) about 8 years ago

Esko... excellent post. You beat me to it... I had plans of writing this blog sometime tomorrow, after reading about this the other day.  But my main focal point has been the news about FHA loans. So I am glad someone got to this sooner than later. As Lenn Harley mentioned, this needs to be read my many. Great job and I liked how you presented this.  I especially liked the phrase that you wrote... "They don't have to be boarded up."  Meaning Fannie & Freddie.. what we need to do is board up Barney Frank and ship him off to an island. Great job here..

Jeff Belonger

Posted by Jeff Belonger, The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans ( Social Media - Infinity Home Mortgage Company, Inc) about 8 years ago

I have to agree with Jay and la vie Frankes!!!

Esko...Good post!  Thanks for providing the information!

Posted by Michael and Cheron Lange, Associate Broker, GRI (Solutions Real Estate) about 8 years ago

Yep. I blogged this Friday. Seems like Barney and the likes want to be King


Posted by Tony Grego, 317-663-4173 #1 Trade Association for Alternative Inv (REISA - 317-663-4173) about 8 years ago

Barney Frank and one of his former bed partners. . .   No, I will not go there at this time. I will just say that the voters who put Frank in office should be very, very ashamed!

Sharon, Lenn and Jeff said it better than I could. Great post.

Posted by Anonymous about 8 years ago

Esko, thanks for posting this.  It prompted a lot of great comments...

Posted by Tony Cordi (Tony Cordi, Broker (Beachtime Realty)) about 8 years ago

Barney Frank is a disgrace.  Just a month before the hammer came down on the GSE's he was going around saying there was no problem with Fannie & Freddie, while he was scheduling his next date with his boyfriend at Freddie Mac.  And now the President is going around trying to rewrite history - claiming we're in a financial crisis due to greed and large bonuses at the financial institutions, trying to sell even more regulation. They couldn't pass their extreme health care reform, so now they're targeting lending - trying to fool at least 51% of the people.  When Fannie and Freddie go away, FHA will remain. It's all about more control and a government takeover of lending.  If you're going to regulate the banks, you need to regulate congress first.  Barney Frank would be a great start.  If the Scott Brown senate victory is any indication, the Massachussetts voters will toss out Barney Frank in November.

Here's a good article about what really happened with the housing bubble - that contrary to liberal belief, the housing crisis actually started in the 90's.  George Bush sounded the warning bells, but not loud enough in my humble opinion.  But again, this all began in the 90's. The word has to get out.


Posted by Ronald Borch (WJ Bradley Mortgage Capital Corp, S. Burlington, VT) about 8 years ago

Esko - On the issue of the GSEs, Barney Frank has less credibility than anyone; and to merely sweep away the organizations as if that will magically solve the problem is most ludicrous of all.  While both Fannie and Freddie have severe problems, primarily due to incredibly incompetent management and lack of proper Congressional oversight, shutting them down will only hide the crimes, and will open the door for a new and equally corrupt operation. Great post!

Posted by John Mulkey, Housing Guru ( about 8 years ago

Fannie and Freddie suck. And so does Barney.

Posted by Dave about 8 years ago


I think you're spot on about oversight. What diiference does it make to have a new secondary mortgage entity if the rules and how they are regulated are the same?

Posted by Todd & Devona Garrigus, Broker / REALTORS® (Garrigus Real Estate) about 8 years ago

For those who understand lending, you know the importance of Fannie and Freddie and why they exist.  Barney Frank is a (sorry, can't say anything nice).  Anyways creating a new replacement structure for Fannie nad Freddie is stupid.  Make adjustments.  I have an idea, why don't we wipe Barney out of office and revamp him!

Posted by Kyle Jan, Phoenix AZ Homes for Sale about 8 years ago

I don't know, I just look at so many things going on and relate it to accountability, of men being men (you know like it used to mean ... honest, sincere, hard working) (and women too). It reminds me of the show "King of the Hill" when Hank said he had a disability; hard working, honest, and expected much of himself. Everyone passes blame, nobody confesses. I know I am off topic here, but we blame this and that when the real issues are something else. Good post :) 

Posted by Stephen Kappre, Helping You Home (KW Hometown) about 8 years ago

We need to move real slow with this !!!!!!!!!!Lending has to be increased !!!

Posted by Michael J. Perry, Lancaster, PA Relo Specialist (KW Elite ) about 8 years ago

I think this understatement is funny:  "Fannie Mae and Freddie Mac, in all honesty, have had their problems lately."  Problems?  That's putting it mildly.  Unfortunately any effort to do away with Fannie and Freddie will probably just be cosmetic.  To think Fannie and Freddie don't need some reform (if not total replacement) is to ignore billion$ of bad decisions from the two GSEs.

Posted by Jason Romrell (Business Attorney and Success Advisor) about 8 years ago

Not sure Fannie and Freddie need to go, just the "cronies"  that ran it into the ground.  I hope it can be repaired somehow to be what it was intended to be way back when. 

Posted by Sajy Mathew, Making your real estate dreams become a reality! (Coldwell Banker Residential Brokerage) about 8 years ago


I don't normally believe in conspiracy theories, but if this is done the Banks will have almost total control.

Great comments from AR members.

Thanks for the post.

Posted by Wayne L. Brown (Broadview Mortgage) about 8 years ago

Barney Frank should have zero credibility on this issue.  But then again, I never want to overestimate the intelligence of the American public or Congress.  I think in this election cycle we have proven that the republicans can fool all of the people all of the time. You just need good talking points, great catch phrases and the ability to paralyze the government with a filibuster rule.  And yes, Barney Frank is a dem - he is also a disgrace to his party and country.

But I digress. Sure - let's just get rid of FHA - get rid of Fanny and Freddy and then let's see if we can OUT DO the Great Depression in a one-two punch.

Posted by Ruthmarie Hicks (Keller Williams NY Realty - 120 Bloomingdale Road #101, White Plains NY 10605) about 8 years ago

Great Blog, Great Comments.  The elimination of Fannie or Fredie will only fuel higher interest rates.  Why do you think interest rates on jumbo loans that Fannie and Fredie don't purchase are higher?  In spite of all their mis-management issues, they serve a valid place in the market.

Posted by Ira Bodenstein, NMLS#: 445143 (PNC Mortgage) about 8 years ago

Are the 1990's so far behind us that we cannot remember them?
Has too much time passed since the last major mortgage meltdown?
Was it so long ago that we cannot recall the inevitable decline that always follows incredible, unsustainable growth?

It seems greed blinded our hind sight. This does not mean that anger must rule over common sense. Common sense tells us that over corrections can be as bad as the initial misdirection. Foreclosing on Fannie Mae or Freddie Mac for whatever reasons would be one of the most extreme examples of a knee jerk reaction.

Normally I would chalk this report up to posturing in order to bring the graveness of the situation to the attention of those in charge and/or the media, but with the recent portrayal of the banking industry and more specifically the mortgage industry this concept may gain some support.

Posted by Tim Fry ( about 8 years ago

This is a must read blog post, and enough people have identified Barney Frank's involvement. However, ending Fannie and Freddie's 'lives' would 'kill' the mortgage industry. Another example of fire, aim, um, ready?

Posted by Christianne O'Malley, Exceptional Service - Delivering Results in Reno! (RE/MAX Realty Affiliates) about 8 years ago

The GSE, congress and Wall Street need to be held to the fire for the corruption that took place. I am not talking about bad loans, I am talking about the greed and backroom sweat heart deals that allowed the bad loans to take place. People need to be held accountable.

That said, we need Fannie/Freddie now more than ever. They need to be cleaned of the rot that runs them, streamlined and used in the fashion that they were intended to be used.

Posted by James Lyon (Vista Pacific Realty) about 8 years ago

My goodness,another can of worms.  I seriously think Barney LIKES shhoting himself in the foot.

Posted by Jean Hanley, Specializing in Folks Who Want To Buy/Sell Homes (Coldwell Banker Kivett Teeters) about 8 years ago

Esko this is so tipical of government, in stead of fixing the problem and coming down on those that created it.  So come down on the agencies and transfer the clowns that a new agency to keep on ripping off people under a new name.

The answer is to hold them accountable to the rules, and if they still don't follow them put those making the big bucks out on the street and not the little guy who had nothing to do with it.

But what we will most likely see is more rules so that the boys in DC can claim that they are doing something, but in reality they don't have any intention of enforcing the bogus rules that they created.

Posted by George Souto, Your Connecticut Mortgage Expert (George Souto NMLS #65149 FHA, CHFA, VA Mortgages) about 8 years ago

MY GOD, how do other countries survive without programs like FHA, VA, Freddie, Fannie, Ginnie?!?!  How do they do it?!?!?!  They must be so envious of the USA;O)


Look at Germany, Sweden, etc...healthy economies yet lower home ownership rates.....hmmmm...maybe home ownership isn't what it's all cracked up to be....

Posted by Leigh (sold @ peak, would give up profit for social sanity) about 8 years ago

Oh boy -- my thoughts of Barney Frank and his cronies are hardly printable.  I think he'd look good in stripes and matching bars.  Ending Freddie and/or Fannie would be a great sacrifice to protect the complicity of the "Franks" of the world.  It seems to me that something is amiss that these folks can amass the power they have and mess all our lives up and carry on like it has nothing to do with them!  It's amazing.  Greed and power is surely a terrible evil and corrupter.

Sue of Robin and Sue

Posted by Robin Dampier REALTOR®, Hendersonville & Western NC Real Estate Source (Coldwell Banker King) about 8 years ago

Wow, I agree that Fannie Mae and Freddie Mac worked fine for many years as the major players in the Mortgage World. It is such a shame that it was not regulated better and the shananigans that went on led to this crisis. (Shame on Barney Frank).

I am from Massachusetts and hope that the election of Scott Brown sends a huge message to Washington.  We can not tolerate the mismanagement of agencies that are so integral to our economy. Transparancy in government and services that effect our economy!!!

I hope that someone with half a brain can give Fannie Mae and Freddie Mac the CPR it needs to serve this country in the way that it was intended.

Posted by Marianne Cherico, Home Stager -Massachusetts and Rhode Island (Interiors by Marianne Cherico) about 8 years ago

Len Harley makes a great point!!!!  Many posters are not ignorant to the truth of the matter.  Too much home cooking by the ones in charge.  We don't need to allow them to focus the blame on Fannie and Freddie.  I don't know if our economy can be saved.  Too much greed - everywhere.


Posted by Karen Pannell, Owensboro KY Real Estate -270-903-2167 Homes, Cond (Real Living / Home Realty) about 8 years ago

Let's create a new government entity. Yippee! (big groan)

Posted by Erica Ramus, MRE, Schuylkill County PA Real Estate (Erica Ramus - Ramus Realty Group - Pottsville, PA ) about 8 years ago


Their problems are entirely fixable.


The secondary market is here to stay and needs strong players like these two GSEs.


Exactly. These two GSEs just need some streamlining.


They might be serious.

Posted by Esko Kiuru about 8 years ago


Precisely. They should do nothing right now while the housing market is still in such a bad shape. Some minor adjustments might be in order but that's about it.


DC is one of a kind place, that's for sure.


The getaway car is a good one.


Agree. They are part of the housing infrastructure.  

Posted by Esko Kiuru about 8 years ago


Right. Their dismissal would throw the housing market upside down.


Hopefully the situation gets fixed soon so we can avoid any major upheavals.


You said it.


There you go.


Posted by Esko Kiuru about 8 years ago


I thought this needs to be discussed here on AR and hopefully our views will be heard beyond the network. Thanx for the support.


Any time.


He may have to back off on this one.

Ghost commenter,

Thanks for stopping by.

Posted by Esko Kiuru about 8 years ago


Lots of good comments that hopefully will be listened to in Washington.


These GSEs should be left alone at least for now.


Well put. Inadequate oversight is largely to blame for their problems.




Posted by Esko Kiuru about 8 years ago


That's what these two need, strong oversight.


Fannie and Freddie are the bedrock of the housing market.


Accountability, that's what we need everywhere.


Exactly. Think it through before acting.

Posted by Esko Kiuru about 8 years ago


Strong oversight would've minimized those bad decisions.


A nice repair job would do it.


Giving banks a bigger slice of the pie might be behind this plan.


Thanks for broadening the discussion here.

Posted by Esko Kiuru about 8 years ago


Over-correction will just cause more trouble down the road.


Eliminating Fannie and Freddie would alter the mortgage landscape in a major way.


That's right. They need fixing but should be kept in business.


Thanks for coming by.

Posted by Esko Kiuru about 8 years ago


You are right on. Accountability would've avoided their problems, so the oversight function needs fixing, not the GSEs themselves.


We should consider adapting some of the programs other countries have.


Thanks for stopping by. Complicity protection could be behind this plan.


Exactly, they have done a great service to the housing market and could be fixed with the right tools.


Posted by Esko Kiuru about 8 years ago


Looks like the oversight people are trying to slide out of responsibility here.

Posted by Esko Kiuru about 8 years ago


Precisely, that's what we need, another huge governmental agency.

Posted by Esko Kiuru about 8 years ago

Esko: The question has to be asked; what would replace them? Portfolio lenders are not the answer. The market would hugely contract. Look at their market share now. It is miniscule. I bet the government will swoop in once again and bail out Fannie and Freddy. Is this the right thing to do? Probably not. I'm a free market guy but there has to be an alternative and I'm not sure there is one right now. Thanks for the post!

Posted by Paul McFadden, Pest Control, Seattle, WA. (Paratex) about 8 years ago


It would be ill-advised to scrap them altogether. Reshape them a bit would probably work best, and provide meaningful oversight.

Posted by Esko Kiuru about 8 years ago
Yep absolutely let's fix it.Bush will get baelmd no matter what. If it happens on your watch you go down with the ship.You know if a democrat was president at the time you and the GOP would have been ripping him or her a new one....that's how it works.This all did not happen in the past two years that Congress was democrat controlled, all those politicians in both parties have a hand in this shit. Did you see they gave themselves a raise today?
Posted by Dolly over 5 years ago