Treasury Report Outlines Path for Winding Down Fannie, Freddie

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Fox News:

WASHINGTON -- The Obama administration laid out three broad options Friday for reducing the government's role in the mortgage market. All three would almost certainly lead to higher interest rates and costs for borrowers.

The administration said in a report that the government should withdraw its support for the mortgage market slowly, over five years or more. The report describes a path for winding down the troubled mortgage giants Fannie Mae and Freddie Mac.

But rather than making a single recommendation, the administration offered Congress three scenarios and will let lawmakers shape the final policy.

The options are:

-- No government role, except for existing agencies like the Federal Housing Administration.

-- A government guarantee of private mortgages triggered only when the market is in trouble.

-- Government insurance for a targeted range of mortgage investments that already are guaranteed by private insurers. The government guarantee would kick in only if those private companies couldn't pay.