Associated Press: Republicans: Halt taxpayer aid for Fannie, Freddie

by Alan Fram

Federal taxpayers should stop propping up Fannie Mae and Freddie Mac, and Congress will wean the country away from its reliance on the two huge but fiscally feeble housing finance companies, House Republicans said Wednesday.
 
Democrats conceded that changes are needed in Fannie and Freddie, which have swallowed $150 billion in federal aid since the government took them over in September 2008. But they cautioned that care must be taken to avoid jeopardizing the popular 30-year fixed rate mortgage and the access to the housing market that the two companies have helped provide to millions of moderate-income families.
 
The lawmakers made those points at a hearing Wednesday of the House Financial Services subcommittee that oversees the two housing giants.
 
Neither Republicans nor Democrats are ready to push specific plans or timetables for overhauling Fannie and Freddie through Congress. That underscores the divisions that exist over how to fix the way the nation's $11 trillion housing market is financed, and the hesitation many lawmakers feel about making drastic changes in such an enormous sector at a time when the economy is beginning to rebuild strength after its deep swoon of the past three years.
 
Congress' work on reshaping the country's mortgage finance system is expected to take months or longer.
 
Rep. Scott Garrett, R-N.J., who chairs the subcommittee, said his goal is "to ensure that we put an end to this destructive and costly housing finance policy that protects taxpayers and actually strengthens communities instead of destroying them."
 
Many Republicans argue that Fannie and Freddie were a major cause of the nation's housing crisis of falling home prices and numerous foreclosures by financing numerous subprime loans _ mortgages that quickly became worthless because they went to people who could not afford them.
 
Democrats say Fannie and Freddie merely followed the private sector, which set the pace for making subprime loans, and performed the constructive functions of keeping 30-year mortgages affordable and helping lower income families become homeowners.
 
Rep. Maxine Waters, D-Calif., the subcommittee's top Democrat, said she is open to any plan that takes steps like preserving the 30-year mortgage and helping all qualified borrowers get loans.
 
Waters said that while the details of any housing finance overhaul are crucial, "I think it's even more important that we make clear what values underpin our vision for the future."
 
In coming days, the Treasury Department is expected to release a report stating the Obama administration's views on how to reshape Fannie and Freddie. That report is expected to propose several options for revamping the country's housing finance system, including phasing Fannie and Freddie out and gradually shrinking the government's role in mortgage financing, according to lobbyists who have heard descriptions of the plan.
 
Neither Republicans nor Democrats suggested specific plans for overhauling the two companies, a task that is expected to take Congress many months or longer.
 
In coming days, the Treasury Department is expected to release a report stating the Obama administration's views about how to reshape Fannie and Freddie.

Copyright: Associated Press, 2011.