Fannie, Freddie would be phased out under Obama Administration's plan

By Lisa Kerner

Charlotte, N.C., Feb. 11 - The Obama Administration on Friday delivered a report to Congress outlining a path for reforming America's housing finance market that includes cutting the government's footprint in housing finance as well as a wind down of Fannie Mae and Freddie Mac.

According to a news release, plan reforms also call for fixing flaws in the mortgage market through stronger consumer protection, increasing transparency for investors and improving underwriting standards.

The Obama Administration's reform plan recommends that Fannie Mae and Freddie Mac be required to price their guarantees as though held to the same capital standards as private banks or financial institutions. This would level the playing field for the private sector to take back market share over the next several years.

The plan also supports gradually increasing required down payments so that any mortgage that Fannie Mae and Freddie Mac guarantee eventually has at least a 10% down payment.

As Fannie Mae and Freddie Mac's presence in the market shrinks, the Federal Housing Administration would return to its traditional role.

"This is a plan for fundamental reform - to wind down the GSEs, strengthen consumer protection and preserve access to affordable housing for people who need it," Treasury secretary Tim Geithner said in the release.

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