US plans to ‘unwind ‘ Fannie Mae and Freddie Mac

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US president Barack Obama is set to overhaul the US mortgage market and “wind down” Fannie Mae and Freddie Mac.

The BBC reports Obama wants to put the risk back on the private sector and begin to withdraw the massive Government support.

The Government-backed lenders were set up in the 1930s Great Depression and have grown hugely since then. They needed to be bailed out in 2008 when US taxpayers spent £122bn to rescue the firms but they have since returned to profit and repayed £80bn to Government.

Obama’s plan would see the US Government oversee the housing market and act as a secondary loan guarantor. It would mean Freddie Mac and Fannie Mae are unwound within five years.

Speaking at a high school in Arizona, Obama said it is time to “turn the page on this kind of bubble-and-bust mentality”.

He said: “For too long these companies were allowed to make huge profits buying mortgages, knowing that if their bets went bad, taxpayers would be left holding the bag.

“It was ‘heads we win, tails, you lose.’ And it was wrong.”

The move comes on the same day the UK’s own Government-backed mortgage scheme, Help to Buy, was attacked by Fitch Ratings.

Fitch says the scheme will boost banks’ profitability but builders are unlikely to build more homes because they may not be sold when the scheme finishes in three years.