Page 13 - January-February-2018_GSE_Report

FANNIE MAE AND FREDDIE MAC JJAN.U- AFERBY. 22001188
Hensarling outlined the following principles for “any sustainable housing nance reform plan”:
1. Fannie Mae and Freddie Mac “must be wound down and their charters repealed”
2. Securitizers need strong bank-like capital and community nancial institutions must be able to compete on a level playing eld”
3. “Any new government affordable housing program needs to at least be on budget, results based, and target actual homebuyers for the purpose of buying a home they can actually afford to keep” and
4. “The Federal Housing Administration must return to its traditional role of serving the rst-time homebuyer and low- and moderate-income individuals.”
Separately, House Financial Services Housing and Insurance Subcommittee Chairman Sean Duffy (R-WI) and Ranking Member Emanuel Cleaver (D-MO) have held a series of hearings and begun working on crafting legislation for housing nance reform. Chairman Hensarling’s views can be expected to signi cantly impact the efforts undertaken by Duffy and Cleaver to create a bipartisan reform bill.
Reading the housing reform tea leaves
Given the divergent interests of the stakeholders in the mortgage complex and the crowded Congressional calendar in an election year, the odds of passage of housing reform nance legislation are between nil and none. Lawmakers are more likely to advance spending initiatives, such as infrastructure programs, than tackle housing nance reform, which faces widely diverging interests of stakeholders in the mortgage complex.
The risks of disrupting the mortgage market and possibly destroying the 30-year mortgage market appear to far outweigh the bene ts of liquidating Fannie Mae and Freddie Mac, under HERA provisions, to achieve housing reform through administrative action.
While the draft Corker-Warner bill appears to offer preferred stock owners some hope for recovery, the odds of passage in 2018 are slim to none, although a fully-developed, “ready to go” package could be considered in a Lame Duck session, if there is one. More likely, the 116th Congress will address housing nance reform with a Trump appointee at the helm of FHFA and new leadership in the House Financial Services Committee and possibly the Senate Banking Committee.
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