Fannie Mae-No Politics (FNMA)

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Obit, thank you very much for the explanation. if I follow...

So NewCo would be run as a cooperative, while an overhauled Fannie and Freddie, stripped of their government charters, would still be owned by shareholders? However, NewCo would issue explicit government backing of loans for a set fee. This fee would be used to capitalize an emergency fund that could be used to protect taxpayers during the next inevitable housing downturn? NewCo would presumably have strong risk assessment and qualified lending standards to back only prime mortgages (let's say historical values of FICO > 650).

The reformed Fannie and Freddie could still make money by issuing/selling MBS and generate profit/dividend for their shareholders. They would essentially be on a level playing field with the rest of the financial institutions (no longer an implicit government guarantee), except they would specialize in the secondary mortgage market and probably have a large infrastructure/platform advantage.