Republican Senator Pat Toomey released a series of guidelines ending state control of Fannie Mae and Freddie Mac that would need Democratic support to move forward. This is the latest attempt to resolve the biggest open problem of the 2008 financial crisis.
Fannie and Freddie overhaul legislation must "promote a liquid secondary mortgage market while protecting taxpayers and promoting equitable access for all lenders," Toomey of Pennsylvania, senior Republican on the Senate Banking Committee, said in a statement Monday.
Amanda Thompson, director of communications for Toomey and other Republicans on the banking committee, said the announcement signals an openness to creating something that many GOP lawmakers have long resisted: a federal guarantee on the trillions of dollars in mortgage bonds that Fannie and Freddie are issuing .
Pacific Investment Management Co. and other fund managers said that releasing Fannie and Freddie without a government backlash on their mortgages would be a huge mistake, arguing that it would be difficult for many investors to hold such assets without the US behind it Market standing – a scenario that can make it significantly more difficult for consumers to obtain home loans. Federal government support for mortgage bonds is currently being taken over by the Conservatory Companies, which have had their status for more than a decade.
Legislation that establishes a U.S. guarantee is likely the only way to get a bill through democratically controlled Congress and potentially free Fannie and Freddie from government grip during the Biden administration. Even if a plan gets enough support to move forward on Capitol Hill, Treasury Secretary Janet Yellen would also have the support of Treasury Secretary Janet Yellen if she was to manage an unprecedented $ 1.9 trillion stimulus plan to help one hit by the coronavirus pandemic Business to help.
Toomey's statement came ahead of a banking committee hearing on Tuesday on housing that may focus on Fannie and Freddie. The mortgage giants are essential to the real estate market as they buy loans from lenders, pack them into mortgage bonds, and guarantee investors payment of principal and interest.
"The current system exposes taxpayers to future bailouts, encourages over-taking of risks and crowds out private capital," Toomey said in the statement. "I hope that my colleagues, the administration and all interested stakeholders will work with me to implement these responsible reforms in order to prevent another financial crisis."
Toomey said he wanted to move Fannie and Freddie "to a competitive secondary market" and remove potential barriers to private investment in the home finance system. He said lenders of all sizes and types and in different geographic locations should have fair access to the secondary mortgage market.
Senator Sherrod Brown, the Ohio Democrat who chairs the banking committee, signaled Monday that there are still significant differences in the two party's priorities for Fannie and Freddie. In a statement to Bloomberg, Brown said he wanted businesses to be regulated more like utility companies, with the aim of expanding access to affordable housing and increasing racial justice, an approach outlined in a recent paper.
"The GSEs provide access to affordable, equitable access to home finance for all homeowners and tenants," said Brown. "I look forward to working with the Biden Administration and my colleagues in future hearings to further discuss how GSE utility regulation can help expand housing."
Mark Calabria, director of the Federal Housing Finance Agency, Fannie and Freddie's regulator, is helping end the conservatories. However, the employment status of Calabria, a Republican appointed by former President Donald Trump, is in doubt due to a pending decision by the US Supreme Court. He would also need the support of the Biden administration, which has not issued any major policy proposals on Fannie and Freddie.
Tuesday's Banking Committee hearing on "State of Housing in America" is said to include statements from Chris Herbert of the Harvard Joint Center for Housing Studies, Diane Yentel of the National Low Income Housing Coalition, and Nikitra Bailey of the Center for Responsible Lending, Edward Pinto from the American Enterprise Institute Housing Center and Ed DeMarco from the Housing Policy Council.