Mortgages Should Be ‘Purely Private,’ Garrett Says

The U.S. government needs to end its role in the mortgage market as it decides the future of Fannie Mae and Freddie Mac, Congressman Scott Garrett said.

“Let me stress and be very clear where I stand: I am firmly committed to a purely private U.S. mortgage market over time, free of any government subsidies or guarantees,” Garrett said today in Orlando at the American Securitization Forum trade group’s annual conference.

The U.S. Treasury Department plans to release its proposal for rebuilding the nation’s housing-finance system in the coming weeks, after pumping about $150 billion of capital into Fannie Mae and Freddie Mac to keep the companies solvent.

Lawmakers should scale back the government’s role in the market before implementing any broad reforms, Garrett said. Washington-based Fannie Mae and Freddie Mac, based in McLean, Virginia, should be forced to shrink their mortgage portfolios more quickly and lower the size of loans they buy from the current limit of as much as $729,750, he said.

The U.S. also should bring the companies onto the federal budget, which would create political pressure on lawmakers to act more quickly, said Garrett, a New Jersey Republican who is chairman of the House Financial Services subcommittee on capital markets and government-sponsored enterprises.

Before his party took control of the U.S. House of Representatives last month, Garrett had failed to win enough support in the past three years to pass legislation facilitating issuance of so-called covered bonds in the U.S., a form of mortgage financing used by banks in Europe.

Fannie Mae and Freddie Mac have been surviving on taxpayer aid since they were taken over by the federal government in 2008 amid mounting losses.

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