House hearing tomorrow on Fannie, Freddie’s futureby Tim Manni
Republican lawmakers have been making quite a bit of noise recently, calling for shakeups of certain government policies as they pertain to Washington’s involvement in the mortgage and housing markets. Rightfully so if you consider the mounting tab taxpayer are covering to support a government-controlled Fannie Mae and Freddie Mac as well as failing foreclosure-prevention efforts like HAMP. The latest “ruffling” comes in the form of a hearing to be held tomorrow to discuss the future of Fannie and Freddie and perhaps jump-start their reform:
Rep. Scott Garrett, chairman of the House Financial Services Committee’s Subcommittee on Capital Markets, announced that he would hold a hearing Wednesday on Feb. 9 on reforming Fannie Mae and Freddie Mac.
“This hearing will be the first in a series of hearings to examine the steps Congress can take right now to protect taxpayers from the ongoing bailout of Fannie Mae and Freddie Mac.” The hearing is titled “GSE Reform: Immediate Steps to Protect Taxpayers and End the Bailout,” and will focus on immediate steps that Congress can take to begin F&F’s transition out of Federal conservatorship and examine ways to end the $150 billion bailout.
With the Republican majority secured in the House, we’re likely to see this continued push by the GOP to make their (differing) opinions known. However, despite any pushing or pulling by the House, there’s still a Democrat-controlled Senate that the House must battle against.
“This hearing is probably more symbolic than you might think,” said HSH.com VP Keith Gumbinger. “That said, you must consider that the issues being discussed in tomorrow’s hearing — how government involvement in housing finance has now cost taxpayers billions of dollars, and how to address a failed GSE model — are some of the issues that got many of these Republican lawmakers elected in the first place. It also allows these members to reveal their position before GSE reform hearings come sometime this year.”
Symbolic or not, the Treasury failed to unveil their outline of GSE reform by January 31, 2011 as originally promised. While this came as no surprise to me, it seems as though House lawmakers are using this as an opportunity to share their opinions on how the two agencies should be dealt with before the Treasury has a chance.
All the way back in September 2010, I wrote that letting Fannie and Freddie’s loan limits slip back to $625,500 from $729,750 was Washington’s best opportunity to take a small step aside without causing too much market disturbance. This was their chance to test the private market’s interest and allow private players to regain some of the foothold they lost to government involvement. As we all now know, that didn’t happen.
However, according to Rob Chrisman of Mortgage News Daily, whenever the Treasury does come out with their proposal for dealing with Fannie and Freddie, “it is heavily rumored that the Obama administration will recommend reducing the size of mortgages eligible for government backing.”
In early October, 2010, the president signed a one-year extension to keep the loan limits at $729,750. Even if Chrisman is right, we have no idea if that will be an immediate action or one that we will have to wait another year for.
We’ll keep you posted on tomorrow’s hearing…
READERS: What do you think is the best way to deal with Fannie and Freddie?