A long-awaited study from the Federal Reserve says Fannie Mae's and Freddie Mac's role in the marketplace reduces mortgage rates for conventional borrowers by just 7 basis points and questions whether their existence has any real role in increasing homeownership. Released on Monday, the study (in draft form) also concludes that shareholders in the two companies receive a federal "subsidy" valued at between $50 billion and $97 billion. "Under my 'middle-of-the-road' assumptions, the GSE shareholders retain roughly 52 percent of the gains from their ambiguous government relationship or about $72 billion," writes Federal Reserve analyst Wayne Passmore. The report also says that if the two were private, they would hold "far fewer" of their own mortgage-backed securities. David Seiders, chief economist for the National Association of Home Builders, an ally of Fannie and Freddie, said Mr. Passmore's conclusion that the GSEs only lower rates by 7 bps is "highly questionable and contrary to a number of previous studies." Fannie said in a statement: "At first blush, the findings in the discussion draft appear to be highly theoretical and bear no resemblance to the reality experienced in the housing industry and capital markets every day. However, we will study the paper and provide Dr. Passmore with a complete set of comments."

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