In September 2008 during the height of the financial crisis, the government put the Fannie Mae and Freddie Mac into receivership and provided a $187.5 billion bailout. Fast-forward almost nine years, and the unfortunate reality is that the government-sponsored entities (GSEs) are still the largest suppliers of mortgages today, according to a New York Times DealBook commentary yesterday. In 2016, Fannie and Freddie issued mortgage-backed securities worth $974 billion, up 18 percent from 2015. Fannie Mae recently guaranteed $1 billion of debt backed by Invitation Homes, the single-family rental business owned by the giant private equity firm Blackstone. In making the guarantee, Fannie is taking a big leap into the growing home rental market, in which Blackstone is the biggest player. The guarantee was disclosed with Blackstone’s sale of 25 percent of Invitation Homes in an initial public offering last week. Fannie is making the guarantee on collateral of about 50,000 rented single-family homes that Blackstone bought in foreclosure in the last few years. Never mind that the deal is a big subsidy for Blackstone and Invitation Homes. The downside — the government being liable for at least part $1 billion if there is a default — is real, according to the commentary.
