Potential Changes to Fannie Mae and Freddie Mac Spark Debate in New Hampshire Senate Race
As the New Hampshire Senate race heats up, Republican candidate John Sununu is advocating for a significant shift in the housing finance sector. His proposal to privatize Fannie Mae and Freddie Mac, key players in the home loan market, has become a focal point of discussion.
Sununu’s proposal comes at a time when New Hampshire is grappling with a housing shortage, estimated at 23,500 units. This shortfall is pushing up demand and housing costs, raising concerns about affordability.
Fannie Mae and Freddie Mac play a critical role in the housing market by purchasing mortgages from local banks and lenders. This process provides these institutions with the capital needed to issue new loans, while the mortgages are bundled into securities for investors, backed by guarantees from Fannie Mae and Freddie Mac. This system helps smaller lenders remain competitive, offering flexible options for borrowers, particularly those purchasing a home for the first time or with limited financial resources.
Sununu, who previously served in the U.S. Senate from 2003 to 2009, has long been a proponent of reforming these government-sponsored enterprises. In a 2011 Boston Globe editorial, he advocated for their reduction and replacement with a privatized system that would see large banks take on a more significant role 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.”
He further argued that the current program to increase mortgage accessibility is redundant, as “the U.S. government has dozens of programs that subsidize housing, including discounted loans for first-time buyers, rental vouchers, and traditional low-income housing stock.”
However, this proposal has met with criticism. The consumer rights nonprofit Americans for Financial Reform warns that a move toward a more profit-driven lending industry could exclude many working-class buyers from the housing market. Without government backing, the securities sold by Fannie Mae and Freddie Mac could present higher risks, prompting investors to seek higher returns and potentially elevating mortgage payments.
Sununu’s campaign funding has also drawn attention, with reports of $48,000 in contributions from executives at Blackstone, the country’s largest commercial landlord, and $17,000 from billionaire hedge fund manager John Paulson, both of whom could benefit from privatization. In 2017, both Paulson and Blackstone endorsed a plan to privatize the entities.
The outcome of the Republican primary on September 8, where Sununu faces former Massachusetts Sen. Scott Brown, will set the stage for a potential face-off with Democratic Rep. Chris Pappas in November.
