The Trump administration released a plan to reform the housing finance system and commence a process to remove mortgage giants Fannie Mae and Freddie Mac from the government control. The plan also calls for reducing the influence of the federal government in the housing finance system and promoting competition. The U.S. Department of the Treasury unveiled its Housing Reform Plan on Thursday that recommends reforms to protect taxpayers against future bailouts, preserve the 30-year fixed-rate mortgage, and ensure that Americans are able to fulfill their goal of buying a home. The Federal National Mortgage Association or Fannie Mae, and the Federal Home Loan Mortgage Corporation or Freddie Mac, had suffered significant losses during the 2008 financial crisis due to their structural flaws and lack of sufficient regulatory oversight. Subsequently, the two companies were bailed out for almost $190 billion by the Treasury Department. While the mortgage giants continue to remain in conservatorship more than ten years after the financial crisis, they also continue to be the dominant participants in the housing finance system. But, a lack of reform has left taxpayers exposed to future bailouts and also prolonged the Federal Housing Finance Agency or FHFA's management of the two companies. The two companies' profits currently go to the Treasury, which holds warrants representing 80 percent of the common stock of Fannie Mae and Freddie Mac, in addition to senior preferred stock agreements. The Treasury's plan will enable the companies to retain more of their earnings and bolster their capital buffers. The capital buffers at the two companies currently stand at $3 billion in retained earnings. Freddie Mac and Fannie Mae have become profitable in the past several years since the federal bailout and have repaid their bailout money in full to the Treasury. Their dividend payments to the Treasury currently exceed the money drawn from the Treasury by almost $110 billion. However, the Treasury's plan has been criticized for its lengthy proposals, but failing to commit to a clear recapitalization plan.
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