Fannie Mae, Freddie Mac Fate Uncertain; Lawmakers Split On Plans

The proposed plan to wind down mortgage giants, Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) / Fannie Mae and Federal Home Loan Mortgage Corp (OTCBB:FMCC) / Freddie Mac is uncertain this year.

According to Bloomberg, lawmakers, particularly the Senate Democrats, are split on the proposed plans.  The plan was also affected by the change of regulator for the mortgage giants.

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Lawmakers’ arguments

Democratic Senators Elizabeth Warren of Massachusetts and Sherrod Brown of Ohio recently stated that they will not support a plan unless it would guarantee affordable loans for a majority of home buyers.

“We need to make certain that any future housing finance system preserves broad access to mortgages at reasonable rates and terms,” said Sen. Warren.

On the other hand, Sen. Brown said, he wants an improved oversight on mortgage-servicing practices. He said, “I’m still a ways from signing on.”

Meanwhile, Senator Mark Warner of Virginia argued that expanding the scope of the bill will undermine bipartisan support. Earlier this this month, Sen. Warner said, “What the administration and the chairman, and the others have to resist is trying Senate to move the bill too much to the left.”

Balancing act

Jaret Seiberg, analyst at Guggenheim Securities LLC commented, “To get the progressive wing of the Democratic Party, you have to convince them that the legislation is going to provide for multifamily housing finance and offer a path of homeownership for lower-income consumers.”

Seiberg added that if a proposed measure would expand the role of the government’s role in low-income housing, the support of Republican lawmakers will collapse. He said, “The more you move to the left, the more you risk losing the right. That’s why this bill has always been a giant balancing act.”

New FHFA chief

Meanwhile, consumer and housing advocates opine that pass a bill is less urgent because the Federal Housing Finance Agency (FHFA) has a new leader. According to them, FHFA chief Melvin Watt, a former Democratic congressman, has the ability to implement policies to help homeowners without legislation.

Consumer and housing advocates are encouraging Democrats who support their campaign to put forward measures that would simplify loans for home buyers in all income groups and help low-income renters in multi-family homes.

Obama supports bipartisan bill to wind down Fannie Mae and Freddie Mac

In August last year, President Barack Obama supported the bipartisan bill proposed by lawmakers to wind down Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) / Fannie Mae and Federal Home Loan Mortgage Corp (OTCBB:FMCC) / Freddie Mac (OTCBB:FMCC). The President emphasized that it is time for the government to reduce its role and risk in the mortgage market to ensure that a housing bubble will never happen again.