(Bloomberg) The U.S. housing industry is finding political traction in Congress as it objects to plans that would wind down Fannie Mae and Freddie Mac and eliminate any government role in mortgage finance.
Two members of the House Financial Services Committee, Gary Miller, a California Republican, and Carolyn McCarthy, a New York Democrat, plan to introduce legislation today that would create a government-run replacement for the two mortgage finance companies, which originally were chartered by Congress.
The measure directly challenges House Republican leaders, who have backed bills that would do away with the two companies and aim to minimize the risk that taxpayers will have to bail out future mortgage failures. Fannie Mae and Freddie Mac have cost the Treasury Department about $130 billion since they were seized by regulators in September 2008.
The Miller-McCarthy legislation is endorsed by the National Association of Realtors and the National Association of Homebuilders. It reflects concerns by the industry, consumer activists and some policymakers that a complete withdrawal of government support for home lending could deepen the housing recession.
"There was the idea that people were so tired of taxpayer losses related to housing that the traditional housing lobby would not be able to retaliate effectively," said Jim Vogel, head of agency debt research at FTN Financial in Memphis, Tennessee. "It's time to start waving the housing flag again."
That would be a turnaround from February, when the U.S. Treasury Department recommended selling off the holdings of Fannie Mae and Freddie Mac within a decade and fourth-ranking House Republican Jeb Hensarling of Texas said he wanted to do it in half that time.
Since then, homebuilders, real estate agents, investment banks, civil rights leaders and consumer advocates have lobbied to preserve a government role -- including the implicit federal guarantee behind Fannie Mae and Freddie Mac, which were created by Congress as private companies designed to expand home ownership.
Washington-based Fannie Mae and Freddie Mac of McLean, Virginia, were put under government control when failing subprime loans took them to the brink of insolvency. The Treasury told investors the U.S. would make good on the companies' debt and promised the firms an unlimited line of credit. The companies have accepted more than $160 billion in Treasury aid. As of the first quarter of 2011, they had paid $26 billion in dividends back to the Treasury.