Fannie Mae and Freddie Mac buy huge amounts of loans from banks, making them the ultimate owner of millions of mortgage loans in the United States. Chartered (and now regulated and 82% owned) by the Federal government, these two entities provide hundreds of millions of dollars in capital to be invested in home mortgages. When the unsustainable and often illegal practices of Wall Street bankers destroyed the economy starting in 2008, Fannie and Freddie, who had turned a large chunk of those mortgages into securites, were left holding millions of mortgages from underwater borrowers and families in the foreclosure process. These two entities now own half the underwater mortgages in the United States (about 7 million).
Right to the City has launched a campaign to reform the practices of Fannie and Freddie because:
- They currently have the worst practices (worse than the private banks!) with principal reduction and right to rent and buy back, despite the fact that internal reports from the Federal Housing Finance Agency, the regulatory agency that oversees them, name principal reduction as being the best solution for their investors – that’s us, by the way, US taxpayers.
- Resetting mortgages to fair market value for underwater homeowners and land transfer to communities would promote economic recovery and job growth.
- A change in policy at Fannie and Freddie would set a standard that the rest of the financial sector would be hard pressed to ignore or resist.
This campaign has four major demands:
- Principal reduction to real value for all underwater homeowners.
- End all Fannie-Freddie evictions. Accept rent. And respect renters’ rights.
- Sell foreclosed property to occupants or non-profits at real value, not to investors and hedge funds.
- Turn vacant REO property over to community controlled entities/institutions (don’t bulk sell at steep discounts to hedge funds, big banks & investors) in order to convert properties to long term affordable housing accessible to renters, homeless families/individuals, and former homeowners.
You can take action by going to the Take Back the People’s Bank page here.
You can submit your own story of dealing with Fannie Mae or Freddie Mac by going to the “We Are The Fannie/Freddie 99” Tumblr.
Here’s good, short description of how Fannie and Freddie work: