House Republican to unveil housing reform sans Fannie, Freddie
Rep. Scott Garrett (R-N.J.) will unveil his plan this week for a future mortgage market without a government guarantee, according to a congressional aide. Garrett is the chairman of the financial services subcommittee on capital markets and the government-sponsored enterprises. In June, the House Financial Services Committee cleared Garrett's legislation setting up a framework for funding mortgages through a future covered bond system. But the plan announced this week will be the first from any lawmaker since the Treasury Department proposed three different options in February for how to wind down Fannie Mae and Freddie Mac. The Garrett proposal would more closely resemble the first option from the Treasury white paper, which would lay out a completely privatized system without any government backstop for future mortgages. The Treasury itself said such a plan would minimize distortions in the market and would keep investors from taking on too much risk, but industry trade groups, analysts and economists have routinely said such a plan would make home loans harder to get and more expensive. The Treasury also proposed a backstop for the mortgage market without the GSEs and provided a third option that would provide a government re-insurance of mortgage-backed securities through a catastrophic fund. Treasury Secretary Tim Geithner recently told lawmakers discussions to reform Fannie and Freddie are ongoing and that the European debt crisis and other immediate fiscal concerns delayed the rollout of a final GSE reform plan. A series of bills passed committee earlier in the year reforming some Fannie and Freddie operations, but Federal Housing Finance Agency Acting Director Edward DeMarco said many of those proposals were duplicative of conservatorship agreements. The FHFA regulates Fannie and Freddie. In September 2008, the Treasury took the GSEs into conservatorship and extended the largest bailouts in U.S. history. As of the end of the second quarter, Fannie and Freddie owe the U.S. government more than $142 billion in taxpayer relief. Write to Jon Prior. Follow him on Twitter @JonAPrior.