House GOP bill would liquidate bailed-out mortgage giants

A group of House Republicans outlined on Thursday the details of a bill that would eliminate mortgage giants Fannie Mae and Freddie Mac within five years. 

House Financial Services Committee Chairman Jeb Hensarling (R-Texas) is planning to introduce legislation that would shut down the two entities, which have been under government control since 2008. The bill would also overhaul the Federal Housing Administration (FHA).

Hensarling told reporters that he plans to hold a hearing on the measure, which is expected to be introduced soon, next Thursday. He wants to mark up a bill before Congress leaves town for the August recess. 

{mosads}”Relative to current law, more people would be able to buy homes and afford to keep them,” Hensarling said. 

He argued that the bill would give potential homebuyers more choices of mortgage products and would create more competition in the housing finance market. 

The measure would create a new non-government, nonprofit National Mortgage Market Utility that would fall under the purview of the Federal Housing Finance Administration, which now regulates Fannie and Freddie. 

The measure would not create a new government guarantee on mortgages, Republican lawmakers said. 

Democrats expressed disappointment in the legislation. 

Financial Services Committee ranking member Maxine Waters (D-Calif.) called it “little more than an attempt to reinvent America’s housing finance system using the same kind of right-wing ideology that has eroded America’s middle class for decades.” 

“This bill eliminates the 30-year fixed rate mortgage as we know it and consigns future generations of homeowners to the types of high interest, balloon-payment mortgages that caused the financial crisis,” she said. 

“This is by no means a bipartisan bill. By presenting such an extreme proposal — with no input from Democrats — the chairman stands in stark contrast with his colleagues in the Senate and has made it clear that bipartisan housing finance reform is not his priority.”

Another Democrat, Rep. Gary Peters of Michigan also expressed concern that the proposal would eliminate the 30-year fixed rate mortgage and make homeownership too expensive.

“I believe we can find a reasonable, bipartisan approach to housing reform that ends taxpayer-funded bailouts, but still ensures middle class families can buy a home and build equity without losing their shirt,” he said. 

“It is unacceptable to eliminate the 30-year fixed rate mortgage and risk undercutting any progress we’ve made at economic recovery.”

The sweeping housing finance measure also would repeal new mortgage rules required under the Dodd-Frank financial law, including the qualified residential mortgage (QRM) standards. It would delay the implementation of the qualified mortgage (QM) rule for a year, until January 2015. 

The legislation also would spin off the FHA from the Department of Housing and Urban Development, create a board of directors and require that the agency be self-sufficient, probably within the next couple of years. 

The Senate is looking to handle the overhaul of Fannie and Freddie and the FHA separately, with the latter going first.

Fannie and Freddie have been under government conservatorship since requiring a bailout during the financial crisis.