House Republicans are ready to take on the troubled mortgage giants Fannie Mae and Freddie Mac with a series of bills that would likely chip away at the federal government’s role in the housing market.
Early next week, Republicans on the House Financial Services Committee will unveil at least six bills on Fannie and Freddie, the first step in a concerted effort to extricate the government-sponsored enterprises (GSEs) from their central role in mortgage services.
Fannie and Freddie currently back roughly nine out of every 10 new mortgages in the United States.
The GOP bills will be the first of what could be dozens of measures aimed at altering the mortgage giants. At least two more rounds of housing bills are expected in the weeks ahead.
“We’ll be putting in several different bills,” said Rep. Scott GarrettErnest (Scott) Scott GarrettOn The Trail: The political losers of 2020 Biz groups take victory lap on Ex-Im Bank Export-Import Bank back to full strength after Senate confirmations MORE (R-N.J.). “The idea is to go forward on these.”
Garrett chairs the subcommittee that oversees capital markets and the GSEs and will play a leading role in steering those bills through Congress.
The latest schedule from the House Financial Services Committee makes clear that Republicans want to move quickly on the housing bills once they are introduced. Garrett’s subcommittee will host a hearing to discuss the proposals on March 31, with a markup of the bills to come less than a week later, on April 5.
The contents of bills are not yet known, but they are expected to hit on several points that Republicans have made in recent weeks.
House Republicans, for example, have called on the GSEs to increase the fees they charge to guarantee mortgages to entice more private competition. They have also pushed for the GSEs to wind down their portfolios at a faster rate.
The bills might also address Fannie and Freddie’s affordable housing goals, which Republicans have long claimed drove the GSEs to take on risky mortgages.
While Rep. Jeb Hensarling (R-Texas) has reintroduced his broad bill that would bring Fannie and Freddie out of conservatorship in two years and ultimately wind them down, Republicans are also expected to take on the GSEs with several “specific, targeted” bills, according to Garrett.
A preview of this strategy could be seen in a handful of bills committee Republicans introduced March 14 that aimed to roll back parts of the Wall Street reform package. Those four bills would repeal or alter several specific provisions of the Dodd-Frank financial reform law, as House Republicans hope to find compromises with the Senate that could become law.
But while Republicans have acknowledged that at least some parts of Dodd-Frank are here to stay, adopting the same precision effort for Fannie and Freddie does not mean the GOP is setting aside its broad goal for the GSEs. The ultimate objective is still to eliminate or privatize Fannie and Freddie, drastically reducing the government’s role in housing.
Congressional Republicans and the Obama administration are in rare agreement about Fannie and Freddie. In a February report, the White House called for winding down the GSEs, arguing that excessive government support distorted the housing market and left taxpayers on the hook for the market’s risk.
“The administration came out with their proposal saying the same thing we’re saying, ‘Wind down the GSEs,’ so let’s move on that,” Garrett said.
“You’ve got people coming to the same spot, which doesn’t happen very much in this town over thorny policy issues,” said Edward Pinto, a resident scholar at the conservative American Enterprise Institute (AEI) who was Fannie Mae’s chief credit officer in the late 1980s.
However, Democrats have aired concerns about limiting the government’s role in housing. They worry it would reduce affordable housing opportunities.
Republicans have decided that narrowly crafted bills on the GSEs are the most likely to make it through Congress. By pushing multiple pieces of legislation, the likelihood that something can be passed by the Democrat-
controlled Senate increases, they say.
Small bills gaining legislative traction could help encourage the private sector to take a larger role in the mortgage market, Pinto said.
“You have to signal to the private market that we’re serious about this change,” Pinto said. AEI will be unveiling a revised white paper on housing finance Thursday.