The U.S. Treasury Department official responsible for overseeing financial companies said lawmakers should move carefully as they seek an overhaul of the nation’s housing-finance system after the 2008 credit crisis.
“Some suggest that taking time to get reform right will expose taxpayers to even greater losses at Fannie Mae and Freddie Mac,” Assistant Treasury Secretary Michael Barr said today at a House Financial Services subcommittee hearing in Washington. “That is simply not true.”
Congress and the Obama administration are looking for ways to restructure U.S. housing finance two years after the federal government seized mortgage giants Fannie Mae and Freddie Mac amid losses that pushed them to the brink of collapse. Treasury Secretary Timothy F. Geithner has promised a comprehensive plan for addressing the two firms, which have been sustained by almost $150 billion in government aid since they were placed under U.S. conservatorship in September 2008.
“There is nothing we can do to decrease the obligations Fannie Mae and Freddie Mac incurred ahead of this crisis; those exposures are already baked in,” he said.
Fannie Mae, based in Washington, and Freddie Mac of McLean, Virginia, own or guarantee more than half of the $11 trillion U.S. mortgage market.
The Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac in July issued 64 subpoenas to firms that sold mortgage-backed securities to the companies in an effort to determine whether misrepresentations or omissions might require issuers to repurchase the loans.
“Outstanding repurchase requests continue to be of concern to FHFA,” FHFA Acting Director Edward J. DeMarco said in testimony prepared for today’s hearing. In 2009, lenders repurchased $8.7 billion of single-family mortgages and slightly higher volumes are being repurchased in 2010.
As of the end of the second quarter 2010, Fannie Mae had $4.7 billion in outstanding repurchase requests and Freddie Mac had $6.4 billion. More than a third have been pending for more than 90 days.
“The delays by lenders in repurchasing these loans are a significant concern to FHFA,” DeMarco said.