WASHINGTON, March 4 (Xinhua) -- U.S. mortgage giants Fannie Mae and Freddie Mac will build a new entity as they wind down operations and may eventually be replaced by the entity, the U.S. Federal Housing Finance Agency (FHFA) said Monday.
"It will be initially owned and funded by Fannie Mae and Freddie Mac, and its functions are designed to operate as a replacement from some of their legacy infrastructure," Edward DeMarco, acting director of FHFA, said in a speech before the National Association for Business Economics in Washington, D.C..
"The new venture will be headed by a CEO and Chairman of the Board that are independent from Fannie Mae and Freddie Mac. It will also be physically located separate from Fannie Mae and Freddie Mac," DeMarco noted in the agency' s strategic plan for 2013.
"The overarching goal is to create something of value that could either be sold or used by policymakers as a foundational element of the mortgage market of the future," he added.
By setting up a new structure, FHFA plans to build a new secondary mortgage market infrastructure that can be used by any issuer, servicer, agent and other market participants, preparing for the next phase of housing finance reform and replacing Fannie Mae and Freddie Mac's outmoded proprietary infrastructures.
The Obama Administration delivered a report to Congress that reforms the U.S. housing finance market on Feb. 11, 2011, including winding down the Fannie Mae and Freddie Mac.
The Bipartisan Policy Center, a Washington think tank that promotes bipartisan political solutions, proposed to replace Fannie Mae and Freddie Mac with a new government entity and expand the role of private sector in the housing finance reform last month. There seems to be broad consensus that Fannie Mae and Freddie Mac will not return to their previous corporate forms.
"The Enterprise market presence should be reduced gradually over time," DeMarco told reporters, adding "in the single-family credit guarantee business we have set a target of 30 billion U.S. dollars of unpaid principal balance in credit risk sharing transactions in 2013 for both Fannie Mae and Freddie Mac".
The two government-sponsored enterprises had asked for 190 billion dollars in aid from the U.S. government since they were put under conservatorship in 2008 after suffering heavy loss from the collapse of the subprime mortgage market.
The two companies own or guarantee about half of all mortgages in the United States, or nearly 31 million home loans. Along with other federal agencies, they backed nearly 90 percent of new mortgages over the past few years.