Bill to reform Fannie, Freddie unlikely soon

Reuters News
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Posted: Jul 12, 2011 3:04 PM
Bill to reform Fannie, Freddie unlikely soon

By Margaret Chadbourn

WASHINGTON (Reuters) - The U.S. housing finance system badly needs an overhaul, but chances for winding down ailing mortgage giants Fannie Mae and Freddie Mac in the near term are remote, the top Republican on the U.S. House of Representatives Financial Services Committee said on Tuesday.

"We would like a comprehensive bill. Now, can we get a comprehensive bill? I don't know. I don't think so," said Representative Spencer Bachus, an Alabama Republican who chairs the House Financial Services Committee.

Bachus said at a capital markets subcommittee markup of seven small bills relating to Fannie Mae and Freddie Mac that he is waiting on the Obama administration to introduce a formal outline of how to deal with the two mortgage giants before moving forward in the House with broader legislation.

He was sharply criticized by Representative Barney Frank, the leading Democrat on the committee, for stalling on congressional action to reform Fannie and Freddie.

"I have been hoping that we are going to get legislation to replace Fannie Mae and Freddie Mac. Now I am told by the chairman that we can't do that -- that he isn't able to get a bill passed," said Frank, a Massachusetts Democrat.

FRANK: GOP LACKS REFORM VOTES

The Republicans, Frank said, do not have the necessary votes to enact wider reform of Fannie and Freddie. He questioned the GOP tactic of introducing a flurry of smaller bills over the past couple of months to incrementally reduce the government's role in the mortgage market.

Bachus said he met with Treasury Secretary Timothy Geithner and Housing Secretary Shaun Donovan in April, along with other members of his party, to discuss various proposals on housing finance reform.

He blamed the Obama administration for failing to take the lead on writing a formal reform plan for Fannie and Freddie, and said that has kept Republicans from voting on a comprehensive bill.

The Obama administration outlined ideas for restructuring the housing finance system in February, but did not call for specific legislation.

The Treasury Department unveiled three options in February for overhauling the U.S. housing finance system, and recommended selling off the loans Fannie and Freddie hold over time.

"I'm being criticized here for waiting on the administration. If they want to bring forth a comprehensive proposal, they have two or three weeks to do it," Bachus said.

Fannie Mae and Freddie Mac are companies chartered by Congress to make financing available to support housing markets. The government took over the companies, which are known as government-sponsored enterprises, in September 2008 at the height of the financial crisis when they were hit hard by soured home loans.

More than 85 percent of new loans are backed by the government in some way, including Fannie, Freddie and the Federal Housing Administration, which does not make loans directly but insures those that meet certain standards.

The House capital markets and government-sponsored enterprise subcommittee is considering seven small bills from Republicans. The bills mainly address capping the total dollar amount of federal bailouts for Fannie and Freddie, which have cost taxpayers more than $135 billion so far this year.

Any measure approved in the House subcommittee would have to be approved by the full committee, then the full House and the Senate before it could be sent to President Barack Obama to be signed into law.

Debate over the fate of the mortgage finance enterprises, which are central to the secondary housing market, is expected to spill into 2013.

(Reporting by Margaret Chadbourn; Editing by Jan Paschal)