WASHINGTON – March 29, 2011 – House Republicans plan to introduce eight bills on Tuesday that would each take a small step toward pushing taxpayer-backed mortgage giants Fannie Mae and Freddie Mac out of business, according to congressional aides and lobbyists.
The GOP strategy of using a bite-sized approach to ease the government out of the mortgage system seems to be an acknowledgment that it would be hard to move a single, sweeping bill through Congress this year due to lawmakers’ concerns about going too far and rattling the feeble housing market. The aides and lobbyists spoke on condition of anonymity, a day before GOP lawmakers planned to announce the bills.
Rep. Jeb Hensarling, R-Texas, a member of the House GOP leadership, introduced a wide-ranging bill earlier this month that would end the government’s ownership of Fannie and Freddie in two years. They would either be phased out completely or become fully private companies within three years after that.
The Republican drive to eliminate Fannie Mae and Freddie Mac has been a big part of the effort to shrink government and protect taxpayers. They are also under pressure to take action because during the fight over last year’s financial overhaul law, they said Fannie and Freddie were major contributors to the housing meltdown and chastised President Barack Obama and congressional Democrats for ignoring them in the legislation.
The two companies, along with other federal agencies, backed about 9 in 10 new mortgages over the past year and own or back more than $5 trillion worth of home loans. The collapse of the housing market nearly brought them down in 2008, leading to a federal takeover that has so far cost taxpayers $150 billion.
Hensarling’s bill whittling down the government’s role in mortgages has worried lawmakers who fear that private lenders wouldn’t pick up the slack with today’s frail housing market. Foreclosure rates are high, and home prices and home sales have remained puny
Many congressional aides and lobbyists argue that legislation might have a tough time passing the GOP-controlled House, and little chance of surviving in the Democratic-run Senate. Compounding the difficulty of winning votes for the proposal are the nation’s Realtors, homebuilders and mortgage bankers, who want the government to continue its role in guaranteeing many loans.
While phasing out Fannie and Freddie, Hensarling’s bill also would boost the guarantee fee they charge lenders and take other steps aimed at gradually pushing them out of the mortgage market – in hopes that private banks and lending companies would take their place.
The smaller bills Republicans planned to announce today would incorporate many of those proposals, including a gradual increase in Fannie’s and Freddie’s fees and reducing the size of loans they can back, aides and lobbyists said.
The Obama administration also favors phasing out the two mortgage giants. It has presented lawmakers with three options for doing so with differing, ongoing roles for the government.
Rep. Scott Garrett, R-N.J., who chairs the House subcommittee that oversees Fannie and Freddie and was a leader of the GOP legislative effort, could not be reached on Monday, according to his spokesman, Ben Veghte.
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