Summary: Privatizing Fannie Mae and Freddie Mac could have a major impact on these two government-sponsored housing enterprises, American homebuyers and taxpayers, and mortgage markets in general. Privatization could (1) substantially increase the enterprises' costs of operations and lower profits because of greater competition from other financial firms; (2) raise interest rates on mortgages below $207,000, with as much as $25 a month in additional payments on a typical mortgage of $100,000 and relatively higher increases for homebuyers representing higher default risks; (3) boost competition in the mortgage markets, which GAO believes will likely prevent the reappearance of significant regional disparities in mortgage credit; and (4) decrease taxpayers' risk exposure to enterprise obligations. GAO also assesses several more-limited policy options, such as imposing a fee on the enterprises to compensate taxpayers for their risk exposure. Each option entails benefits and risks that need to be carefully considered.
