Fannie Mae, Freddie Mac Reform After The Mid-Terms

Now that Republicans control both houses of Congress we’re likely in for another two years of gridlock as the President and Congress block each other’s agenda, and while the political dynamics are different than on most issues, Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) reform is likely to remain stalled as well.

Fannie Mae, Freddie Mac reform doesn’t divide along party lines

If you’ve been following Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) over the last few years, you know that GSE reform doesn’t cut cleanly across party lines. The Crapo-Johnson reform bill that made it out of committee back in May was unique in that it had both bipartisan support and bipartisan opposition, splitting votes into at least three different camps: liberals worried that it didn’t do enough to provide working class families with access to affordable mortgages, and conservatives opposed the creation of another large government organization (the proposed FMIC).

It’s hard to imagine that Crapo-Johnson would fare any better in a Republican-controlled Senate, as opposition from more liberal senators like Elizabeth Warren (D., MA) and Chuck Schumer (D., NY) remain in place and opposition from the right increases.

Reform will still be led by FHFA

The other possibility is that the Senate Committee on Banking, Housing, and Urban Affairs puts together a new bill that would get the US government out of the mortgage industry altogether. This would have the advantage of lining up well with the legislation that Rep Jeb Hensarling (R., TX) has already introduced which would eliminate Fannie Mae and Freddie Mac. But again it’s hard to see how this becomes law.

Passing Hensarling’s bill in the House may not be a problem, but it will have a tougher time in the Senate, especially if Democrats decide to repay years of Republican stonewalling with a few filibusters of their own. If they do, President Obama would almost certainly veto. He may not be willing to recapitalize Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC), but that doesn’t mean he’s suddenly become a free market conservative. While the president hasn’t spoken on the matter in a while, we can assume that FHFA chief Mel Watt is building toward a new government-controlled securitization platform with Obama’s blessing. Most likely, we’re looking at another two years without Congressional Fannie Mae and Freddie Mac reform while cases wind through the courts and Watt puts the CSP into action.

Fannie Mae, Freddie Mac Reform After The Mid-Terms

  • HonestMan

    Politicians and Judges criticize Russia and other third world countries for taking private property when the truth is that this is happening in the United States with Fannie and Freddie. The media covers and sells false stories to the people that go clueless living their daily lives. What’s next- taking peoples 401K’s using national security orders?

  • Jarvis

    When will Fannie Mae and their “substitute trustee” lawyers, in cahoots with Bank of America, and Green Tree Servicing… come clean with their copy and pasting and trace forgeries of owners names , and let’s not forget the “ta-da” endorsements that magically appear to fraudulently foreclose on taxpaying citizens across the country?Truly disgusting and despicable, truly. Not only is fraud upon the courts happening, but fraud upon the people. The world we live in is sadly run by corrupt individuals who hold nothing but greed in their hearts and souls , what is left of them that is . If justice is sadly not to be found in this world, surely, MOST SURELY, it will in the next, which will be eternal

  • Richard Thompson

    The time has come to set Fannie and Freddie free. Their slavemasters will have to answer to the next financial crisis, 3% down on a home loan is ridiculous when the GSE’s are prohibited from building capital.