GOP Proposes Legislation Eliminating Fannie And Freddie
Thursday, November 3, 2011 at 4:23PMBy Adrianna McGinley
Acting Director of the Federal Housing Finance Administration (FHFA) and Fannie Mae/Freddie Mac conservator Edward DeMarco told a House subcommittee Thursday that he is supportive but wary of a proposal to increase private mortgage investments.
Chairman of the Financial Services Subcommittee on Capital Markets and Government-Sponsored Enterprises, Rep. Scott Garrett (R-N.J.), proposed last week the “Private Mortgage Market Investment Act,” which would eliminate the bailed out Fannie Mae and Freddie Mac in order to encourage private secondary mortgage investments.
“By facilitating the adjudication of disagreements between investors and issuers, secondly by clarifying the rules around the first lean holders rights, and third by preventing government forced loan modifications that would negatively impact investors, investors will finally have the certainty that they need to get back into the market,” Garrett said in his opening remarks.
DeMarco agreed on the need to move mortgage investments away from government owned entities, but said there is still much that needs to be considered before legislation such as the one proposed could be enacted. Even then, he seemed hesitatant to confirm that Fannie and Freddie could be 100 percent eliminated.
“If the market has certainty that these are the rules of the road, and that these rules of the road aren’t going to be changing every three months, I believe that the private market can step in and do a great portion of what is currently being done by Fannie and Freddie.”
DeMarco acknowledged that the third year anniversary of conservatorship is approaching, but it not meant to be a long term solution, merely an opportunity to maintain a stable market while lawmakers deliberated on appropriate housing finance reform.
Rep. Barney Frank (D-Mass.) also criticized the committee for acting too slowly on housing legislation.
“This bill is premised on the situation when there is no more Fannie and Freddie, but this committee has the power to deal with that and hasn’t moved on anything in that regard.”