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How Do You Solve a Problem Like Fannie and Freddie?

FHFA chief Mark Calabria’s decisions could rock a $5 trillion mortgage market and make a lot of money for hedge funds.

Calabria

Calabria

Photographer: Lexey Swall for Bloomberg Businessweek
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As the director of the U.S. Federal Housing Finance Agency, Mark Calabria has a relatively low-profile job. He’s the designated watchdog for a small group of financial institutions, most notably the mortgage giants Fannie Mae and Freddie Mac, which have been under government control since the financial crisis. But as the Trump administration moves to take both companies out of conservatorship, Calabria is for the moment one of Wall Street’s most powerful and closely watched regulators.

Billions of dollars in hedge fund bets—and the fate of a $5 trillion market in mortgage bonds—could hinge on the decisions Calabria makes in the coming months. So could the availability of affordable 30-year mortgages, which Fannie and Freddie help make possible by buying up home loans and packaging them to be sold in the bond market. By May or June of next year, he says, Fannie or Freddie may be ready to exit U.S. control and seek an infusion of cash from new investors in what could be one of the largest public stock offerings ever.