“I’m concerned that we exit this situation without fixing the original problem,’’ said Representative Ed Royce, a California Republican who sponsored a bill last year that quashed pay hikes for the companies’ chief executives. “The status quo of a nationalized mortgage market is unsustainable for taxpayers.’’
None of this was supposed to go on for so long. When Fannie and Freddie were placed into a conservatorship under FHFA, most policy makers viewed the move as a short-term fix until Congress came up with a full solution.
Politically, the idea of preserving them was considered “patently absurd,’’ said Parrott, who helped lead housing-finance reform efforts for the White House from 2010 to 2013. “Eliminating Fannie and Freddie was a prerequisite for discussion.’’
Plenty of ideas have been floated. Former FHFA Director Edward DeMarco and ex-Senate Republican staffer Michael Bright have proposed turning the GSEs into lender-owned insurers. Others have suggested transforming them into what amount to mortgage utilities, with capped rates of return, essentially keeping them in place in a more regulated form.
Royce says he and other House Republicans plan to introduce a bill as early as September that would require Fannie and Freddie to transfer more risk to the private market and give private institutions access to a technology platform for securitizing loans.
John Taylor, who leads the National Community Reinvestment Coalition, says GSE reform proposals will fail. Think-tank libraries “are filled with all these treatises with proposals from a year to 40 years ago that are simply gathering dust,’’ he said. In all likelihood, the latest proposals “are going to end up in the proverbial stockpile.’’