An influential Senate Republican on Friday released the outline of a plan to overhaul the national mortgage finance system, adding to the sense of momentum around the issue in Washington even as it raised fresh questions about the path forward.
The release of the plan, from Idaho Senator Mike Crapo, chairman of the Senate Banking Committee, took many Washington insiders by surprise. In a statement, Crapo said he wanted “to establish stronger levels of taxpayer protection, preserve the 30-year fixed rate mortgage, increase competition among mortgage guarantors, and promote access to affordable housing.”
The brief outline contained several placeholders marked by “XX,” although its first idea was very much to the point: Mortgage “guarantors” like Fannie Mae
and Freddie Mac
would be private companies.
The release followed a flurry of activity in Washington after the Trump administration’s pick as acting head of the regulator of Fannie and Freddie told his staff to expect a reform plan in as little as two to four weeks. That first step at an “administrative” solution, one forged between the regulator and the Treasury Department, followed over a decade of Congressional attempts – and failures – to disentangle Fannie and Freddie, the giant enterprises that buy mortgages from banks and other lenders, from government conservatorship and to plot a path forward for housing finance.
Read: As Fannie-Freddie reform gets underway, here are the three big questions for the housing market
“I’m very glad that the chairman did it,” said Jerry Howard, CEO of the National Association of Home Builders. “He has been a voice of reason in the wilderness. I absolutely do think that capital flow in the housing finance system is so important to our economy and our society that it should be dictated by the will of Congress, not any one bureaucrat.”
After MarketWatch and other publications reported on the administrative steps, Congressional leaders pushed back, and the White House said it would work with legislators.
See: Maxine Waters calls into question FHFA independence after MarketWatch reports Fannie, Freddie privatization plan
NAHB, like other industry groups that depend on a healthy housing finance system, applauded the notion of a government guarantee for mortgages. The Mortgage Bankers Association on Friday said the group “welcomes the release of Chairman Crapo’s principles for housing finance reform as a significant sign of his continued commitment to work toward finally ending the conservatorships of Fannie Mae and Freddie Mac and ensuring a stable and liquid market – with an explicit, paid-for government guarantee – for both single-family and multifamily mortgages.”
For its part, Treasury issued a release calling “protecting American taxpayers by ensuring the safety and stability of the United States housing finance system” a “priority.”
It is unclear whether Crapo’s move represents the first step in another wave of reform efforts. In the years after Fannie and Freddie were rushed into conservatorship, there were a few big bipartisan Congressional efforts, including one co-authored by Crapo and South Dakota Democrat Tim Johnson, that ultimately died for lack of support. There have also been dozens of high-profile proposals, including one released as recently as this January, which offered suggestions on administrative steps that could pave the way for Congress to act.
NAHB’s Howard, who called himself “ever an optimist,” said he wasn’t concerned that the Friday announcement would complicate efforts by inserting new players into the process.
“If Congress will put its nose to the grindstone and do its job I think there’s a window of opportunity to do it in this congress,” he told MarketWatch. “And maybe, just maybe, this could prove that we don’t have to be a completely polarized country.”
Read: Congress wouldn’t do it, so Fannie and Freddie reformed themselves