Federal Housing Finance Agency Director Mel Watt is urging Congress to speed an overhaul of mortgage giants Fannie Mae and Freddie Mac.
Watt said Tuesday that after nine years of government control, Congress must pick up the pace to create a new framework for Fannie and Freddie, which holds $5 trillion in mortgages.
{mosads}”The role of Congress is to make the tough decisions,” Watt told the House Financial Services Committee during a Tuesday hearing.
“It is important that these decisions get made expeditiously … the conservatorships are unsustainable,” he said.
Congressional lawmakers generally agreed with Watt’s assessment that the government-sponsored enterprises need lawmakers to move forward quickly on legislation. Efforts to produce a bipartisan bill have languished on Capitol Hill in the nine years since the 2008 financial crisis.
House Financial Services Committee Chairman Jeb Hensarling (R-Texas) agreed with Watt that Congress must finally make the tough decisions on housing finance reform.
“Clearly it is time — in fact it is well past time — for Congress to enact sustainable housing finance reform with private capital at its center,” Hensarling said.
“It is time to get off the boom, bust, bailout cycle,” he said during the hearing.
Watt said Congress has major questions to answer in how it will proceed on unwinding Fannie and Freddie.
Those decisions include how involved the federal government will be, how a new system will be implemented to avoid disruption to the housing finance market and what role Fannie and Freddie will play in any new system.
But so far, Congress has yet to get the ball rolling on legislation.
The committee’s top Democrat Rep. Maxine Waters (Calif.) leveled harsh criticism at her Republican colleagues for failing to move legislation.
“I must note that while [Watt] has been hard at work righting the path of Fannie Mae and Freddie Mac, this committee has been at a standstill on housing finance reform,” Waters said.
“Unfortunately, for the last seven years under Republican control, the House has entirely failed to advance broader legislative reforms to end the [government-sponsored enterprises’] conservatorship,” she said.
She said the panel had not held a hearing since Watt’s last appearance two and half years ago on any issues related to reforming the government-sponsored enterprises.
“Even the Senate, known for its slow deliberation, has already convened two hearings on the topic this year,” Waters said.
In 2014, the Senate developed a bipartisan plan to unwind Fannie and Freddie but the bill never reached the floor and lacked support in the House.
There has been more chatter this year about reviving those plans but both the House and Senate have been occupied with a slew of other issues.
Recently, 15 mortgage and banking groups wrote a letter to Watt and Treasury Secretary Steven Mnuchin expressing concern that there are efforts to derail a comprehensive overhaul of Fannie and Freddie.
They are worried that there is a push to allow the government-sponsored enterprises to recapitalize, potentially without congressional approval.
Other housing advocates and some Democratic lawmakers have argued that allowing Fannie and Freddie to rebuild capital will allow the government-sponsored enterprises to continue to support underserved markets.