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Lawmakers Promise Fresh Push to Overhaul Housing Finance
By: Andrew Ackerman, Wall Street Journal
Washington, Jan 24 -
White House, Congress look for ways to get Fannie Mae, Freddie Mac out of government conservatorship
For more than a decade, lawmakers have tried and failed to overhaul the mortgage-finance giants, which were placed in conservatorship during the 2008 financial crisis. Now, Republicans and Democrats in Congress say it is time to try again. Meanwhile, the Trump administration may soon propose steps to ease government control.
“All the policy puzzle pieces are out there, what is lacking is the political will to put them together,” Rep. Patrick McHenry (R., N.C.) said in an interview, adding, “Divided government is the best time for us to legislate.”
Mr. McHenry, the top GOP member on the House Financial Services Committee, this week sent a letter to the panel’s chairwoman, Rep. Maxine Waters (D., Calif.), saying overhauling Fannie and Freddie could draw bipartisan support.
Ms. Waters last week said revamping the housing-finance system is one of her top priorities. “The committee…has a responsibility to look at our housing finance system and address the fates of Fannie Mae and Freddie Mac,” she said in a speech on her agenda.
Rep. Maxine Waters, center, said revamping the housing-finance system is one of her top priorities.
Repeated efforts to overhaul Fannie, Freddie and the housing-finance system have foundered since the crisis. The issue of what to do about them is politically fraught, creating divisions between and within the two parties.
What is more, changes to the housing-finance system could affect the price and availability of mortgages for millions of Americans and potentially disrupt the housing industry. That risk has caused legislators to largely shun efforts to upend the status quo.
Fannie and Freddie play critical roles maintaining the plumbing of the U.S. mortgage market. They purchase loans from lenders and repackage them as securities that are insured if the loans default, guaranteeing roughly half of the $10 trillion housing market.
The firms’ regulator seized the companies through a process known as conservatorship during the George W. Bush administration. The Treasury Department at the time spent taxpayer money to support some $5 trillion in debt securities issued by the companies.
Senators last year tried to negotiate a deal to refashion the companies, but the effort sputtered. Senate Banking Committee Chairman Mike Crapo (R., Idaho), has repeatedly said he is interested in tackling the issue. Mr. Crapo last year brokered a compromise with Democrats to ease some postcrisis rules for the financial industry.
A spokeswoman for Mr. Crapo declined to comment.
Shares of Fannie Mae and Freddie Mac—which are publicly traded, although the companies remain wards of the state—have soared in the past month in anticipation the administration will take its own steps to reduce the government’s role in housing.
Joseph Otting, the acting head of Fannie and Freddie’s regulator, the Federal Housing Finance Agency, last week in an internal meeting said the agency planned to take steps to move the companies out of conservatorship, citing a proposal being developed over several months by the White House, Treasury Department and other government agencies. Mr. Otting also serves as Comptroller of the Currency.
Former government officials recently briefed on the administration’s efforts said no plan was imminent, delayed in part by the partial government shutdown and internal disagreements on how, exactly, to refashion the companies.
Another complicating factor in the release of any plan is the pending nomination of Mark Calabria, a libertarian economist and aide to Vice President Mike Pence, to head the FHFA on a permanent basis. The Senate Banking Committee is preparing to hold a nomination hearing on Mr. Calabria as soon as February, but the release of a detailed plan could form a distraction that could delay or even imperil Mr. Calabria’s confirmation chances, analysts said.
“Any efforts by Otting and [Treasury Secretary Steven] Mnuchin to effectuate recap and release before Calabria is confirmed would increase the likelihood that Calabria will be forced to disavow such efforts during his confirmation hearing,” Beacon Policy Advisors said in a research note.
Some lawmakers are fearful the administration may try to move forward to recapitalize and release the companies from government control without legislation.
“The future of the housing-finance system should be decided by thoughtful and holistic legislation, not improvised administrative action that by its nature cannot be comprehensive or adequately address taxpayer protection or affordable housing,” Sen. Mark Warner (D., Va.) said in a written statement.