Finance professor Clifford Rossi at the University of Maryland’s Robert H. Smith School of Business argues that the incoming Biden Administration should make Fannie Mae and Freddie Mac a single utility.

In a recent HousingWire op-ed, Making Freddie Mac and Fannie Mae a Single Utility, Rossi writes the clock has effectively run out for the FHFA “to release Fannie Mae and Freddie Mac from their 12-year captivity under conservatorship following the Great Financial Crisis… The next logical step in the evolution of the GSEs by combining both entities into one housing finance market utility.” 

Rossi further says:

“The GSEs compete on price, product, or service. Due to charter limits and credit policy, GSE-eligible mortgages are homogeneous, providing little room for product differentiation other than through changes in key risk attributes such as credit score, loan-to-value or debt-to-income ratio or loan documentation, among others. 

“The conservatorship period has proven that a strong regulatory presence can maintain market discipline, manage risk, and provide required stability and liquidity to mortgage markets while maintaining profitability of each entity.  Recapitalizing and releasing the GSEs is a potentially viable option under certain strict conditions. 

“The GSEs have served an invaluable service over the years as stabilizing forces that brought down the cost of homeownership in America.  The next stage in their evolution is within reach to ensure that legacy while protecting taxpayers.”

Rossi has held senior risk management and credit positions at Citigroup, Washington Mutual, Countrywide, Freddie Mac and Fannie Mae.