Fannie, freddie reform moving at sluggish pace

The focus in Congress for the moment might be the debt ceiling, but not too far in the background the effort to reform Fannie Mae and Freddie Mac chugs along–though not necessarily at a rapid pace. Yet “reform” isn’t quite the term, since of the operative assumption of leadership in the U.S. House of Representatives is that the best reform of the GSEs would relegate them to the dustbin of history, and even the Obama administration seems to go along with that idea.

As part of a 31-page report that the administration sent to Congress in February, the administration used the term “wind down” to refer to the future of the GSEs, but urged a timetable of at least five years to wean the real estate industry off of Fannie and Freddie. After all, the GSEs are currently responsible for backing about 90 percent of all mortgages, and are vital to the financing of the multifamily housing industry.

But for all of the talk of “winding down” the GSEs, the task remains a tall order and hasn’t really gotten under way. This isn’t for want of bills introduced in the House, however. Since last winter, three major ones have been introduced.

In March, Rep. Jeb Hensarling (R-Texas) re-introduced a measure that would essentially extinguish the GSEs. The bill would immediately do away with their affordable housing goals, reduce their market share and set in place a schedule that would systematically decrease their portfolio sizes. After three years, the GSEs would essentially be privatized, left to sink or swim.

Source: CPExecutive.com