Protesters and lawmakers took turns firing off questions to Ed DeMarco, current acting director of the Federal Housing Finance Agency, putting the agency’s future plans in the hot seat.
Members of the House Financial Service Committee demanded to know when the wind down of Fannie Mae and Freddie Mac will take place.
The ultimate goal is to find a sweet spot of putting government-sponsored enterprise reform into play while letting the private sector establish a place in the market without disrupting the housing recovery, DeMarco stated.
As a result, the acting director would like to see the gradual role reversal take shape within the next five years. This means that the outlined plan to establish a new venture between the GSEs, as an ongoing push for a single-securitization platform, would also go into effect.
“We are seeing signs of a recovery across most of our markets so I believe it’s time that we do a gradual step back, but I also believe it’s a multi-year venture. It’s going to take time so we don’t disrupt the recovery of the marketplace, so that investors can get back in,” DeMarco explained.
However, factors including government role uncertainty as well as current and impending legislation are advantages for Fannie Mae and Freddie to expand their footprint, compared to shrinking their already 90% takeover of the securitization market.
Congresswoman Shelley Capito, R-WV, pointed out that current regulations such as the qualified mortgage rule benefit Fannie Mae and Freddie Mac’s expansion, given the fact that a loan securitized by the GSEs is automatically considered a qualified mortgage.
On a similar note, Congressman Patrick McHenry, R-NC, noted that it’s cheaper for taxpayers to receive loans through the government-sponsored enterprises, making it harder for the private sector to compete.
To battle that issue, DeMarco argued that the FHFA continues to increase guarantee fees, which are reflective of what private capital would manage with respect to risk.
DeMarco made it clear that until Congress provides directive legislation, he intends to try and shape a competitive market between the government and private sector.
“I’m not expecting it to be done by only the government or only by the private sector. However, the dial needs to move away from the government and needs to move back to the private sector,” he said.