Fannie Mae, Freddie Mac Reform: Pressure From The Left

Speaking today at the five-year anniversary summit for the Making Home Affordable program, Treasury Secretary Jack Lew announced that HAMP would be extended for at least another year through the end of 2016, among other policy moves meant to bolster the housing market, and urged Congress to pass legislation reforming Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC).

“It is time for Congress to pass housing finance reform,” said Lew. “The work in the Senate Banking Committee was an important milestone on the road to reform, but lawmakers need to keep moving forward… passing legislation is the only way we can achieve meaningful and sustainable housing finance reform.”

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Lew giving Congress space to work on Crapo-Johnson Fannie mae, Freddie Mac reform bill

Although he didn’t specify it by name, Lew is referring to the Crapo-Johnson proposal for Fannie Mae and Freddie Mac reform that passed committee but isn’t expected to get a full vote on the Senate floor. The bill has faced opposition from liberals who are concerned that it doesn’t do enough to help working class Americans buy a home, from conservatives (especially in the House) who don’t want to create a new Federal institution (the proposed Federal Mortgage Insurance Corp), and Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) shareholders who are suing the government and insisting that the GSEs be recapitalized and reprivatized.

With so little time left before the mid-term elections and opposition from such disparate groups, Lew must realize that nothing is going to happen soon. But proponents of re-privatizing Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) have pointed to weak housing market data as proof that the GSEs are essential, so the measures that Lew has announced are probably meant to answer the call for immediate action so that Congress can take up the issue again next year.

 Fannie Mae, Freddie Mac – Lew directs Federal Financing Bank to work with FHA on affordable rentals

In addition to extending HAMP benefits to distressed homeowners, Lew said the he wants to support the Federal Housing Agency’s (FHA) multi-family mortgage risk-sharing program to increase the availability of affordable rental units. He would like Congress to authorize Ginnie Mae to securitize FHA risk-sharing loans, but in the meantime he has directed the Federal Financing Bank to finance the mortgages. The first such project, rehabilitating property damaged in Far Rockaway Queens by Hurricane Sandy, is expected to close this fall.

“We must recognize that eventually Treasury’s direct involvement in the mortgage industry will end,” said Lew. “But we will need to make sure our commitment to reaching families who are in trouble lives on.”