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FHFA Director Ed DeMarco is planning to create a joint securitization platform by Fannie and Freddie, a significant step toward winding down the mortgage giants. We offer frequently asked questions on what it means for the industry and the future of housing finance reform.
March 5 -
Sen. Bob Corker, R-Tenn., said recent profits at Fannie Mae and Freddie Mac should go toward helping build a new mortgage finance system.
March 1
WASHINGTON — A bipartisan group of four Senate Banking Committee members, including Sens. Elizabeth Warren, D-Mass., and Bob Corker, R-Tenn., have introduced legislation designed to spur reform of the government-sponsored enterprises.
The bill would prevent the government from using any increase in guarantee fees by Fannie Mae and Freddie Mac to offset other government spending. It would also ban the sale of preferred shares of the firms without congressional approval.
While the bill itself is not radical — it mostly preserves the status quo — its authors represent a diverse coalition. It was jointly introduced by Warren, a liberal, Sen. David Vitter, a conservative from Louisiana, and two moderates: Corker and Sen. Mark Warner, D-Va.
"The reality is that if Congress were to spend 'g'fee' revenue from the GSEs on other programs, reforming these mortgage behemoths would become nearly impossible," said Corker in a press release. "At the same time, if Treasury were to decide to sell its preferred share investment without Congress having first reformed our housing sector, we would just be returning to a time where gains are for private shareholders and losses are for taxpayers. Neither of these is an acceptable outcome."
Warner agreed the bill was necessary to provoke housing finance reform, an issue that has languished since Fannie and Freddie were seized by the government in September 2008.
"We know our housing finance system is not sustainable in its current form, and this legislation will keep us on a path to accomplish real reforms," he said in the release. "We believe that as we transition Fannie and Freddie out of their present roles, we need to think about the system in its entirety.
In the joint press release, Warren said that she was committed to "starting a bipartisan effort to take on housing finance reform this Congress."
Analysts said this bill has a shot at passage in part because of who is supporting it.
"We put 45% odds that this gets enacted into law, which are very high odds for a measure that was just introduced," wrote Jaret Seiberg, an analyst with Guggenheim Partners, in a note to clients. "We base our odds on the fact that Sen. Elizabeth Warren will bring support from the left and Sen. David Vitter will bring support from the right while Sens. Bob Corker and Mark Warner deliver the moderates."
Isaac Boltansky, an analyst with Compass Point Research, said the bill could be paired with separate legislation to help borrowers refinance into loans with lower interest rates.
"Certain provisions of that bill, specifically the extension of the HARP program beyond its currently scheduled December 2013 expiration, could easily be packaged with this bill," he wrote in a note to clients.
Indeed, Senate Banking Committee Chairman Tim Johnson's office suggested the GSE and refinancing bills could be moved as a single package, adding he will hold a hearing on the issue next week.
"While this bill does not address the root issue of reforming the GSEs, it does prevent additional roadblocks that would make it even harder to enact reform," a spokesman for Johnson said. "Chairman Johnson believes this bill and Senators Menendez and Boxer's refinancing bill are both commonsense measures, and he would like to see them move forward together."
