Fannie, Freddie Fates Still Up in the Air: One Year Later

This week, TheStreet and RealMoney will be exploring the aftermath of Lehman Brothers' bankruptcy filing and the ensuing market chaos it brought to a head almost a year ago.

NEW YORK (TheStreet) -- Lawmakers, regulators and Wall Street have waged a very public battle over financial sector regulatory reform, but ask about Fannie Mae (FNM Quote) and Freddie Mac (FRE Quote), and a chorus of crickets begins to chirp.

The two mortgage-financing giants were taken over "temporarily" by the government over a year ago to foster stability in the housing market, to provide liquidity in the mortgage market and to put the firms in "a stronger position" to operate as the government saw fit.

While some of that has occurred, Fannie and Freddie are in a worse position than they were before being placed into conservatorship on Sept. 7, 2008. There's still no clear resolution for handling their mounds of bad debt, nor is there a comprehensive, long-term plan for mortgage finance in the U.S.

"I don't hear much down here in Washington about what's going on," says Jeffrey Curry, a former official at Fannie and Freddie's regulator, the Office of Federal Housing Enterprise Oversight. "But what I've heard is there's no way that Fannie and Freddie are going to be private companies again."

Ultimately, the new Fannie-Freddie model will probably not include shareholders, though the firms still trade on the New York Stock Exchange today. The new structure will likely include some type of public entity that provides explicit support for mortgage bonds, rather than the implied guarantee offered by the "government-sponsored enterprises" or GSEs.

Now Congress and the Obama administration are tasked with coming up with specifics that minimize risks to taxpayers while maximizing stability and liquidity in the housing market.