Senators try to clear way for housing finance reform

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"Reforming a broken housing finance system and protecting taxpayers is a win win, and we can begin that effort with this bipartisan GSE reform proposal," said Vitter. "This bill shows that Republicans and Democrats do agree on the urgency required to reform the mortgage finance system."

Congress has previously looked to increases in the "g-fee" as a way to fund other government programs. For example, lawmakers agreed to increase that fee to cover the cost of a two-month extension of the payroll tax cut at the end of 2011. The regulator for Fannie and Freddie, the Federal Housing Finance Agency, has also advocated for increasing the fee, but as part of an effort to wind down the enterprises by making it easier for private competitors to enter the market.

The sponsors of the new bill also contend that allowing the Treasury to unload its shares in the GSEs without reforms in place could simply cement in place the old, outdated system.

Congress has done lots of talking about reforming how the nation creates and backs mortgages since the financial crisis, but little has been done in terms of action. Republicans have pushed hard to privatize Fannie and Freddie or otherwise entice private capital into a market dominated by the government entities. Democrats say they recognize the need for the private sector, but have expressed concerns about what could happen to affordable mortgages in any system overhaul.

The White House too has said Fannie and Freddie must be wound down, but has declined to endorse a specific path forward.

Fannie and Freddie were weighed down by losses spurred by the subprime mortgage crisis, and have only been kept afloat by billions of dollars in government support. Ever since the government stepped in and took over the agencies in the fall of 2008, the two entities have required nearly $200 billion in funds.