$FNMA How Can Fannie Mae and Freddie Mac Leave Conservatorship?
There are two ways that Fannie Mae and Freddie Mac could exit their conservatorships. If they
become financially viable, they could return to stockholder control. If they are unable to become
financially viable, they could enter receivership. There is no legal reason that one GSE could not
go into receivership and the other GSE return to stockholder control, although this might present
some policy questions about the desirability of having a monopoly GSE.
There are several obstacles to a return to financial viability. In conservatorship, the GSEs are
balancing their goals of support for home mortgage markets and their goal of profitability. At
times, these goals may conflict. The concern of the federal government and FHFA for mortgage
market stability and liquidity may take precedence over the return to profitability.43
The 10% cash or 12% senior preferred stock dividends owed to the federal government could be
burdensome. The annual cash dividends of this stock equal or exceed the profits that the GSEs
have earned in most years since 1998. This suggests that it could be difficult if not impossible for
the GSEs to pay the required dividends without Treasury’s continued financial support.
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