Fannie and Freddie: Too Big To Shrink? via CoStar Group

With a clear mandate from the Obama administration to wind down the operations of Fannie Mae and Freddie Mac eventually, the Federal Housing Finance Administration, which oversees their operations, outlined its plans for meeting that objective. For starters, it hopes to cut the two government sponsored entities’ market share of new multifamily lending by 10%.

What's less clear is if that can be done in the current environment, or even if the eventual objective can be met. Both Fannie Mae and Freddie Mac showed operating performance improvements in 2012. These improvements were primarily driven by the higher-quality business written since 2008, a recovery in housing prices, and a more stable interest rate environment, according to Fitch Ratings.

Because of the key roles the two play in the U.S. housing market recovery, there is waning motivation for pursuing more wide-reaching GSE reforms in the near future, Fitch also noted.

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