Mortgage Giants Said to Do Little for Buyers

Perceived U.S. government backing for Fannie Mae and Freddie Mac is worth billions to shareholders but does little to lower mortgage rates for home buyers, Federal Reserve studies said Thursday.

The suggestion that the government-sponsored enterprises fall short in their primary task of promoting homeownership comes as Congress considers toughening oversight after accounting scandals at Fannie Mae and Freddie Mac.

Fed economist Wayne Passmore said Fannie’s and Freddie’s “ambiguous relationship” with the U.S. government generated a subsidy worth $122 billion to $182 billion. Shareholders retain $53 billion to $106 billion of that, the study said.

He said 44% to 89% of the companies’ market value was attributable to their perceived government support.

But that implicit subsidy does not benefit homeowners, and Fannie’s and Freddie’s market activity has a negligible effect on mortgage rates, even during periods of market stress, Fed economists contended.

Fannie Mae replaced its chief executive and chief financial officer last month over major accounting errors.

Shares of Fannie Mae slipped 39 cents to $69.94, while Freddie Mac dropped 51 cents to $70.11, both on the New York Stock Exchange.