WASHINGTON – Federal taxpayers should stop propping up Fannie Mae and Freddie Mac, and Congress will wean the country away from its reliance on the two huge but fiscally feeble housing finance companies, House Republicans said Wednesday.
Democrats conceded that changes are needed in Fannie and Freddie, which have swallowed $150 billion in federal aid since the government took them over in September 2008. But they cautioned that care must be taken to avoid jeopardizing the popular 30-year fixed rate mortgage and the access to the housing market that the two companies have helped provide to millions of moderate-income families.
Neither Republicans nor Democrats are ready to push specific plans or timetables for overhauling Fannie and Freddie through Congress. That underscores divisions over how to fix the way the nation’s $11 trillion housing market is financed, and a hesitation over making drastic changes in such an enormous sector even as the economy starts rebuilding strength after its deep swoon of the past three years.
Fannie and Freddie, along with other federal agencies, have accounted for about 90 percent of new mortgages over the past year, reflecting a lingering hesitancy by private lenders to re-enter the housing market. Congress’ work on reshaping the country’s mortgage finance system is expected to take months or longer.
After a hearing Wednesday of the House Financial Services subcommittee that oversees the two housing giants, Rep. Scott Garrett, R-N.J., who chairs the subcommittee, said that he wants to see “eventually no government backstop for any entity” like Fannie and Freddie. He said he had no specific schedule for moving legislation through his committee.
Many Republicans argue that Fannie and Freddie were a major cause of the nation’s housing crisis of falling home prices and numerous foreclosures by backing numerous subprime loans – mortgages that quickly became worthless because they went to people who could not afford them.
Rep. Jeb Hensarling, R-Texas, said the main question is “how do we transition to a competitive market without taxpayer guarantees, and how soon can we get there.”