John Sununu Advocates Privatizing Fannie Mae and Freddie Mac

Sununu Advocates Privatization of Fannie Mae and Freddie Mac Amid New Hampshire Housing Crisis

Republican John Sununu, who is running for the U.S. Senate in New Hampshire, has proposed privatizing Fannie Mae and Freddie Mac. These government-backed mortgage entities play a crucial role in maintaining the accessibility of home loans for working families.

New Hampshire is currently grappling with a housing affordability crisis, with a reported shortage of 23,500 housing units. This shortage is contributing to increased demand and rising housing costs in the state.

Fannie Mae and Freddie Mac purchase mortgages from local banks and lenders, providing these institutions with the necessary capital to issue more loans. The acquired mortgages are then bundled into securities and sold to investors, with the two organizations guaranteeing payments. This process enables smaller lenders to remain competitive in the housing market.

Smaller lenders often offer more flexible terms for borrowers with unique financial situations, which can be especially advantageous for first-time homebuyers or those with limited financial resources.

Sununu, who served in the U.S. Senate from 2003 to 2009, previously suggested a shift towards a fully privatized system for Fannie Mae and Freddie Mac. In a 2011 Boston Globe editorial, he advocated for scaling down the two entities and increasing the involvement of large banks in holding mortgages.

“Forty years ago, the two government-sponsored enterprises offered local lenders the only alternative to holding mortgages on their own books,” Sununu stated. “But today, that liquidity can be provided by at least a dozen large banks that securitize home mortgages, commercial loans, and other assets.”

Sununu further argued that the necessity for a program making mortgages more accessible is diminished due to the U.S. government’s existing housing subsidies, including discounted loans for first-time buyers, rental vouchers, and low-income housing options.

However, Americans for Financial Reform, a consumer rights organization, argues that privatization could make the lending industry more profit-driven, potentially excluding many working-class buyers from the housing market. Without government support, securities sold by Fannie Mae and Freddie Mac might carry more risk, leading investors to demand higher returns and thus increasing mortgage payments.

Sununu’s campaign has received financial backing from individuals likely to benefit from his proposed changes. Executives at Blackstone, the largest commercial landlord in the U.S., contributed $48,000, while billionaire John Paulson, who operates a real estate-invested hedge fund, donated $17,000.

Both Paulson and Blackstone had previously endorsed a 2017 proposal to privatize these entities. NPR reported that such a move could result in significant financial gains for Paulson.

Sununu is set to compete against former Massachusetts Sen. Scott Brown in the upcoming September 8 primary. The victor is expected to face Democratic Rep. Chris Pappas in the November elections.