Recent news coming out of Washington, D.C. rouses the notion once again of getting rid of Fannie Mae and Freddie Mac. Fannie and Freddie are the mortgage giants tasked with providing liquidity in the mortgage marketplace buying mortgage loans from individual lenders. If you’re considering building goodbye fannie and freddienew rental properties, what will their fate have to do with your construction needs and your buyers?

Shuttering Fannie and Freddie has been bounced around since as early as 2001 when the administration took a stance that both were essentially playing with other people’s money with an implicit guarantee from the United States government. Back then they were publicly traded corporations but they were getting a little too big in the minds of many. That forethought proved right as they were part of the mortgage meltdown that started in 2009.

There really is no way to replace Fannie and Freddie with private investors as their appetite is simply too big. Instead, recent proposals suggest an option similar to FHA and VA loans. Instead of buying mortgages a new entity, tentatively called the Federal Mortgage Insurance Corporation, or FMIC, will guarantee mortgage bonds with a fee paid for by the lenders issuing the loan. The fee of course will ultimately be paid by the consumer who takes out the loan.

With regard to construction financing, there would be little, if any noticeable impact. From the permanent mortgage perspective, replacing these two mortgage giants with private capital will likely mean higher rates for consumers. Private capital can’t compete with such large volumes of loans currently purchased by Fannie and Freddie. Higher rates will mean fewer can qualify for a mortgage. Fewer qualifiers means more renters, helping to prop up rents.  However, the phase in/phase out of FMIC, Fannie and Freddie will take at least 10 years according to those in the know so there’s really no need to alter your current investing strategy. There’s plenty of time.