April 1, 2011 (Chris Moore)
Republicans in the House of Representatives and the Senate have introduced bills whose ultimate goal is to shrink the federal government’s role in the mortgage market. While the Obama Administration’s three option proposal has been little heard from since it was first unveiled over a month ago, the GOP has come out swinging in its boost for GSE reform.
Thursday, Sens. John McCain, R-Ariz., and Orrin Hatch, R-Utah, unveiled a bill that would dismantle Fannie and Freddie within five years, or turn them completely into private entities.
The legislation proposes having Freddie Mac and Fannie Mae charge higher fees to dissuade use by mortgage borrowers and to start shrinking the size of their mortgage portfolios so that the mortgage market will open up to private banks.
Since their collapse and subsequent seizure by the federal government in 2008, Freddie Mac and Fannie Mae have cost taxpayers over $150 billion. Both Republicans and Democrats, and the Obama Administration, agree that the mortgage giants need to be wound down, they just disagree on how they want to do it.
“Never again can we allow the taxpayer to be responsible for poorly managed financial entities who gambled away billions of dollars,” said McCain, who made the near-collapse of the two housing finance companies an issue in his failed 2008 presidential campaign. “Fannie and Freddie are synonymous with mismanagement and waste.”
Meanwhile, over in the House, Scott Garrett , R-NJ., released a summary of eight bills that cover a broad range of issues in bringing an end to the federal governments involvement with the mortgage giants and establishing policies for a new system of financing the housing industry. Each bill covers a different aspect of reform and was introduced by a different member of the Financial Services Committee.
Garrett, who is the Chairman of the House Financial Services committee overseeing the GSE’s, says the bills are “very specific, very targeted bills to end the bailouts, protect the taxpayers, and get private capital off the sidelines.”
The eight bills are expected to be approved next Tuesday and would take steps like forbidding employees of Fannie and Freddie from being paid more than analogous federal workers, increasing the fees they charge to guarantee loans and ending the requirement that they subsidize lower-cost housing.
The new bills would also require Freddie Mac and Fannie Mae to adhere to the new Qualified Residential Mortgage (QRM) rules from which they are now currently exempt. Garrett said this bill will make it clear that Fannie Mae and Freddie Mac will be held to the same standards as any other secondary mortgage market participants.
Tags: GOP, Freddie Mac, Fannie Mae, mortgage giants, GSE, QRM, mortgage market, bailouts, mismanagement, federal government, secondary mortgage market