Thursday, November 20, 2014

To end the conservatorship,” said Johnson

  Nov 20, 2014 2:00 AM CT 
Regulators Urged to Set Fannie-Freddie Free From U.S.

“If Congress cannot agree on a smooth, more certain path forward, I urge you, Director Watt, to engage the Treasury Department in talks to end the conservatorship,” said Johnson, who is set to retire in December.

Johnson is the first lawmaker to publicly say that regulators may have to take control of the companies’ futures. He echoes the predictions of housing analysts that there is no chance the Republican leadership taking over the Senate will reach an agreement with Democrats and PresidentBarack Obama to reform a system that guarantees affordable mortgages to most Americans. That would leave the overhaul to Watt, who has already begun to make a series of changes, from streamlining operations to transfers of mortgage-bond risk to private investors.

“If we could get Congress to do something that would pass, it would be the best solution,” said Clifford Rossi, a finance professor at the University of Maryland’s Robert H. Smith School of Business in College Park. “But it’s clear that it’s highly unlikely, particularly after the midterm elections, that we’re going to get legislation again.”

After a $187.5 billion taxpayer bailout, Fannie Mae and Freddie Mac rebounded and are now required to send the Treasury all of their profits. They’ve paid a combined $225.5 billion

“Can the FHFA actually take action without Congress?” he said. “The answer to that is yes.”

Watt said Treasury would have to initiate talks with him if Congress isn’t able to come up with a solution. Treasury spokesman Adam Hodge said the Obama administration “continues to believe that the best way to responsibly end the conservatorship is through comprehensive housing finance reform legislation.”
“All of that can help reduce risk, but at the end of the day, if something happens --say there’s some external factor that tanks the economy -- is the government making good on these bonds or not?” she said.
Some of the strongest support for keeping Fannie Mae and Freddie Mac operating is coming from consumer advocates and civil-rights groups which see the companies as the best way to guarantee that low-income families and minorities have access to the mortgage market. Those groups helped stall the legislation winding down the two companies this year as they lobbied Democrats includingElizabeth Warren of Massachusetts and Sherrod Brown of Ohio not to support it.

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