Congress is preparing to address an issue that has loomed for five years: the fate of Fannie Mae and Freddie Mac.
In the Senate, bipartisan legislation is in the works that would replace the two government-sponsored enterprises with a new “public guarantor” within five years. The move is part of a broader plan where Washington no longer will backstop the country’s $10 trillion mortgage market.
Sens. Bob Corker (R-Tenn.) and Mark Warner (D-Va.) are leading the effort. To date, two other Democrats – Sens. Jon Tester of Montana and Heidi Heitkamp of North Dakota – and two other Republicans – Sens. Mike Johanns of Nebraska and Dean Heller of Nevada – also are working on the bill, which has yet to be formally introduced.
Serious talks about the future of the two GSEs faded quickly after President Obama issued a short “white paper” in the first quarter of 2011 that mapped out a trio of scenarios for their future.
Today, almost all concerned concur that the status quo is untenable. However, several centrist Republicans and a large number of Democrats say that a federal role is necessary in order to preserve liquid markets for the 30-year, fixed-rate mortgage. Conservative Republicans want a private mortgage market with no new federal guarantees at all.
Source: “Fannie, Freddie Future Finds a Focus,” Wall Street Journal (June 17, 2013)
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