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Republicans shift gears on housing market ‘reform’

By ALAN FRAM
March 29, 2011

House Republicans plan to introduce eight bills on Tuesday that would each take a small step toward pushing taxpayer-backed mortgage giants Fannie Mae and Freddie Mac out of business, according to congressional aides and lobbyists.

The GOP strategy of using a bite-sized approach to ease the government out of the mortgage system seems to be an acknowledgment that it would be hard to move a single, sweeping bill through Congress this year due to lawmakers’ concerns about going too far and rattling the feeble housing market. The aides and lobbyists spoke on condition of anonymity, a day before GOP lawmakers planned to announce the bills.

Rep. Jeb Hensarling, R-Texas, a member of the House GOP leadership, introduced a wide-ranging bill earlier this month that would end the government’s ownership of Fannie and Freddie in two years. They would either be phased out completely or become fully private companies within three years after that.

The Republican drive to eliminate Fannie Mae and Freddie Mac has been a big part of the effort to show voters that the GOP wants to shrink government and protect taxpayers. They are also under pressure to take action because during the fight over last year’s financial overhaul law, they said Fannie and Freddie were major contributors to the housing meltdown and chastised President Barack Obama and congressional Democrats for ignoring them in the legislation.

The two companies, along with other federal agencies, backed about 9 in 10 new mortgages over the past year and own or back more than $5 trillion worth of home loans. The collapse of the housing market nearly brought them down in 2008, leading to a federal takeover that has so far cost taxpayers $150 billion.

Hensarling’s bill whittling down the government’s role in mortgages has worried lawmakers who fear that private lenders wouldn’t pick up the slack with today’s frail housing market. Foreclosure rates are high, and home prices and home sales have remained puny

Many congressional aides and lobbyists argue that legislation might have a tough time passing the GOP-controlled House, and little chance of surviving in the Democratic-run Senate. Compounding the difficulty of winning votes for the proposal are the nation’s realtors, home builders and mortgage bankers, big campaign contributors who want the government to continue its role in guaranteeing many loans.

While phasing out Fannie and Freddie, Hensarling’s bill also would boost the guarantee fee they charge lenders and take other steps aimed at gradually pushing them out of the mortgage market — in hopes that private banks and lending companies would take their place.

The smaller bills Republicans planned to announce on Tuesday would incorporate many of those proposals, including a gradual increase in Fannie’s and Freddie’s fees and reducing the size of loans they can back, aides and lobbyists said.

The Obama administration also favors phasing out the two mortgage giants. It has presented lawmakers with three options for doing so with differing, ongoing roles for the government.

Rep. Scott Garrett, R-N.J., who chairs the House subcommittee that oversees Fannie and Freddie and was a leader of the GOP legislative effort, could not be reached on Monday, according to his spokesman, Ben Veghte.

Copyright © 2011 The Associated Press

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2 Responses to Republicans shift gears on housing market ‘reform’

  1. woody188

    March 29, 2011 at 3:31 pm

    Over 95% of loans are purchased by Fannie and Freddy. Both are in debt by some combined $5 trillion dollars, yet they somehow still purchase all these loans freeing up the origination banks to re-lend the cash and act only as the loan servicing agent for a handsome fee. Ending them would end another free ride for banks, which is why this initiative will fail. But ending them would also drop the housing market into a deep hole for some 30 years. It’s a no-win situation. Their is much more pain ahead for the housing market.

    • Carl Nemo

      March 29, 2011 at 4:36 pm

      The housing market is dead due to the massive loss of jobs nationwide for the blue collar class citizen in particular. Recently a statistic was quoted by one of our site members that over 42,000 factories have been closed in this country since 2000. Our elected crimpols keep addressing symptoms instead of the root cause which is the continual offshoring of jobs, outsourcing of specific job functions, the glut of H1-b visas and not clamping down on illegal immigration. We’ve been cut loose to defend for ourselves, while no doubt all of the dirtbag reps have their secret offshore accounts in another currency besides the USD and gold while they continue everyday in every way to scuttle our nation.

      How many people are surviving on unemployment extensions, food stamps, their savings gutted and no work history to even get a loan. Our housing market crash is the equivalent of Japan’s recent earthquake event. Seemingly the sob’s that caused this monstrous nightmare are going to get away with their crimes while our elected blithereing leadership gives them the Kings X to continue on only in different scheming ways.

      You responded to an article the other night to the effect that you are considering the rental of your home that’s been for sale. That article was blowing smoke concerning “it’s time to buy”, this is the worst time to buy because the housing market hasn’t found a bottom as yet and it won’t for years to come. During the Great Depression, virtual mansions ended going for $5-10g’s which was a lot of money n those times, but the mansions originally went for hundreds of thousands of dollars for that period, real mansions made of stone, brick and not stick-built McMansions of our times. The smart thing is for people to rent until the dust settles which could be many years yet down the road. We’re also facing sovereign default. We’re flat dead broke as a nation and the madmen and women at the helm of the USS America seemingly have no intention of turning us about from an imminent engagement with rocky shoals.

      Carl Nemo **==