Fannie Mae and Freddie Mac, the mortgage-finance giants operating under U.S. conservatorship, would be unwound and replaced by a lender-owned securities issuer under a proposal from Representative Maxine Waters.
Waters of California, the top Democrat on the House Financial Services Committee, is preparing draft legislation for release tomorrow calling for elimination of the two companies within five years and creation of a Mortgage Securities Cooperative to issue government-guaranteed debt. It also would create a multifamily platform and finance a housing trust fund to provide access to lower-income borrowers.
The Waters proposal is unlikely to gain traction in the Financial Services Committee, where Republican Chairman Jeb Hensarling has offered a bill that would almost entirely privatize the mortgage market. The Hensarling bill hasn’t gained enough support for a full House vote.
House Democrats have been split on the best way forward for a housing overhaul, with Representatives John Delaney of Maryland, John Carney of Delaware and Jim Himes of Connecticut saying on Jan. 17 that they would introduce a bill to replace Fannie Mae and Freddie Mac with a public-private partnership.
The Senate Banking Committee is working on bipartisan legislation that would wind down Washington-based Fannie Mae and McLean, Virginia-based Freddie Mac, which were seized in 2008 and got $187.5 billion in taxpayer aid before returning to profitability. Lawmakers in both parties and President Barack Obama’s administration have said the current system of U.S. housing finance is unsustainable.