tailieunhanh - Freddie Mac and Fannie Mae: Their Funding Advantage and Benefits to Consumers

In flood-prone cities such as Manila, potential sea level rise and increased frequency and inten- sity of extreme weather events poses enormous challenges on urban local bodies’ ability to adapt. Apart from their location, the scale of risk is also influenced by the quality of housing and infra- structure, institutional capacity with respect to emergency services, and the city’s preparedness to respond. The urban poor are most at risk from exposure to hazards in coastal cities, as they tend to live in riskier urban environments (such as floodplains, unstable slopes), tend to work in the informal economy, have fewer assets, and receive. | Freddie Mac and Fannie Mae Their Funding Advantage and Benefits to Consumers by James E. Pearce Vice President Welch Consulting College Station Texas and James C. Miller III Director Law and Economics Consulting Group Washington . January 9 2001 Welch Consulting 111 University Dr. East Suite 205 College Station Texas 77840 Law and Economics Consulting Group 1600 M Street . Suite 700 Washington 20036 Executive Summary The benefits that American consumers derive from the activities of Freddie Mac and Fannie Mae and the advantages these private corporations receive from their federal charters are central issues in the public discussion of their role in the housing finance system. At the request of Freddie Mac we independently analyzed a 1996 report that the Congressional Budget Office prepared on this subject the 1996 Study and then addressed the benefits to consumers and to the corporations. v We first find that the 1996 Study both understated the consumer benefits and overstated the firms advantage in borrowing funds the funding advantage . The study used faulty data and inappropriate methodology. v We estimate that Freddie Mac and Fannie Mae generate interest-cost savings for American consumers ranging from at least billion to billion per year. In contrast we estimate that the value Freddie Mac and Fannie Mae indirectly receive from federal sponsorship in the form of their funding advantage ranges from billion to billion annually. Thus even using the lowest estimate of consumer benefits and the highest estimate of the funding advantage in our range of estimates the value of consumer interest-cost savings resulting from Freddie Mac and Fannie Mae s activities significantly exceeds the value of their funding advantage. Freddie Mac and Fannie Mae also provide benefits beyond those that can be quantified in terms of savings on mortgage interest expense by homeowners. These include the maintenance of liquidity in the mortgage market during .