The U.S. House of Representatives is likely to pass a bill this year to reduce the influence of the government-backed Federal Housing Administration, Fannie Mae and Freddie Mac, Representative Scott Garrett said today.
Government-backed mortgages have accounted for more than 90 percent of U.S. housing financing since 2008, when the private mortgage market dried up. As housing recovers and the government-sponsored enterprises -- Fannie Mae and Freddie Mac -- return to profitability, it’s time to rely more heavily on the private sector, said Garrett, a Republican from New Jersey.
“This is all being financed by the federal government -- by us, the taxpayer,” Garrett, chairman of the House Financial Services Subcommittee on Capital Markets and Government-Sponsored Enterprises, said at the Milken Institute Global Conference in Beverly Hills, California. “We should be able to get GSE reform and FHA reform done in this calendar year. We’ll get it done in the House and send it over to the Senate, where normally all good bills go to die.”
The U.S. housing market has been climbing out of its worst collapse since the Great Depression as buyers seek to take advantage of mortgage rates near record lows and home prices that are 29 percent below their 2006 peak. Prices rose 9.3 percent in February, the fastest pace since May 2006, according to the S&P/Case-Shiller index of property values in 20 cities, released today.
Quick reform of housing finance may endanger the recovery, said Emile Haddad, chief executive officer of FivePointe Communities Inc., a residential-community developer based in Aliso Viejo, California. He also spoke at the conference today.
“The last thing we should do now is rock the boat,” said Haddad, whose company controls 50,000 lots in master-planned communities in San Francisco, Los Angeles and Orange County, California.
Garrett, who has yet to introduce a mortgage-reform bill in Congress’s current session, said all government-backed agencies must be reformed at once, with accounting transparency and continued access to mortgages for moderate-income Americans -- the type of loans insured by the FHA.
“We will still, even though I’m a free-market capitalist, have a federal imprint on housing when all is said and done,” Garrett said.
The FHA, a government-mortgage insurer, is facing losses due to defaults on loans it backed as the housing market collapsed, and may need a taxpayer subsidy of almost $1 billion this year, according to White House budget analysts. The bailout makes it more likely Democrats will join Republicans in reforming mortgage agencies, Garrett said.