The House Financial Services Committee approved a Republican housing bill that would liquidate U.S.-owned financiers Fannie Mae and Freddie Mac and limit government mortgage guarantees.
The bill, offered by Representative Jeb Hensarling, the Texas Republican who leads the committee, was passed on a mostly party-line vote of 30-27. Representatives Gary Miller of California and Mike Fitzpatrick of Pennsylvania were the only Republicans opposing the bill, which Hensarling proposed as an alternative to a bipartisan Senate measure.
“After today, it’s unclear what happens next,” Brian Gardner, senior vice president for Washington research at Keefe, Bruyette & Woods Inc., said in an interview. “Some think the House leadership wants to vote on the bill but I think there is some apprehension within the leadership until it becomes clear that the Senate will vote on a bill.”
Hensarling’s legislation would eliminate Washington-based Fannie Mae and Freddie Mac of McLean, Virginia, within five years and replace them with a National Mortgage Market Utility to securitize mortgages. Unlike the Senate bill, the House measure wouldn’t include U.S. backing for securitized loans, though it would let the Federal Housing Administration play an expanded guarantee role in an economic crisis.
“This legislation is radical, it is unworkable and it was written in secret without any input from the Democrats on this committee,” Representative Maxine Waters of California, the panel’s ranking Democrat, said yesterday. Democrats on the committee said the Republican bill would mean the end of 30-year fixed-rate mortgages.
Hensarling said he is eager to bring his measure to a vote on the House floor. He said he will meet with House Republican leaders next week and will hold listening sessions for lawmakers outside the Financial Services Committee.
“We’ve taken a good step towards protecting homeowners, protecting taxpayers and creating a sustainable housing system,” he said today. “It’s an important work and I was very gratified today to get it passed out of the committee.”
The bill’s emphasis on near-complete privatization of the mortgage market places Hensarling and his committee at odds with their colleagues in the Senate. The measure proposed last month by Senators Bob Corker, a Tennessee Republican, and Mark Warner, a Virginia Democrat, would replace Fannie Mae and Freddie Mac with a government reinsurer and force banks to hold capital of 10 percent of the principal of the underlying securities to cover any first loss on the loans.
The two government-sponsored enterprises, which have been under U.S. conservatorship since 2008, provide liquidity for the mortgage market by buying and packaging loans into securities on which they guarantee payment of principal and interest. They have begun posting record profits this year after being sustained by $187.5 billion in taxpayer aid since they were seized amid losses during the credit crisis.
The House bill is H.R. 2767; the Senate measure is S.1217.