From HW:
Republicans in the House of Representatives unveiled seven more bills Friday to reform the government-sponsored enterprises for a total of 15 since March.
Rep. Scott Garrett (R-N.J.) is chairman of the GSE subcommittee and leads the GOP effort to wind down Fannie Mae and Freddie Mac. He said Friday the second round of new bills continues the work of ending bailouts for these companies and ushering private capital into the mortgage market.
Republicans introduced eight bills at the end of March.
“We can no longer afford to sit back and allow the ongoing bailout of these failed institutions to continue,” Garrett said. “While special interest groups and the guardians of the status quo may not want to admit it, Fannie and Freddie’s days are numbered. It’s not a matter of if, but when – the quicker we begin the process of dismantling them the better off we’ll be.”
Two other House lawmakers introduced a bipartisan GSE reform bill this week that would wind-down Fannie and Freddie over five years and provide a government backstop for securities issued by five replacement companies funded by private dollars.
A spokesman for Rep. Don Manzullo (R-Ill.) said the latest Republican bills are “discussion drafts” and have not been formerly introduced.
Manzullo sponsored a bill to prevent the Treasury from lowering the 10% dividend payment Fannie and Freddie are required to make. Both companies have so far pulled $164 billion from the Treasury since entering conservatorship in 2008.
Rep. Jason Chaffetz (R-Utah) sponsored another bill that would subject Fannie and Freddie to Freedom of Information Act requests. Because the GSEs were originally chartered by the federal government, they were not part of the federal government, and were exempt from FOIA. Now that they’re in conservatorship, Chaffetz maintains they are now part of the government.
Rep. Robert Hurt (R-Va.) will propose a bill requiring Fannie and Freddie to dispose of all “nonmission critical assets,” which includes patents and data.
Rep. Michael Fitzpatrick (R-Pa.) sponsored a bill setting a total dollar cap on the amount of money to be used in the Fannie and Freddie bailout.
“American taxpayers have already spent too much on Fannie and Freddie,” said Fitzpatrick. “While stability needs to be maintained at these organizations, they must also be put on clear notice that they cannot continue to charge their bad investment decisions on our national credit card.”
Rep. Steve Stivers (R-Ohio) will propose a bill ensuring that replicas of the GSEs would not be created to replace Fannie and Freddie in the future housing finance system. The bill amends a section in the Housing and Economic Recovery Act that allows a new company to be created if either GSE goes into receivership.
Rep. Randy Neugebauer (R-Texas) sponsored a bill to prohibit taxpayers from funding legal fees for former Fannie and Freddie employees. Neugebauer led an investigation into what executives were charging the GSEs to cover legal expenses after the crisis. Roughly $162 million has been spent defending Fannie, Freddie and former executives there in a variety of lawsuits.
I wonder what would really happen to our real estate market market if the GSE’s were actually phased out. The real estate market is still totally dependent on buyers borrowing power. Even more so in Southern California. There’s not even close to enough cash buyers in the system to sustain prices.
Most of the wealth in this country was pinned on borrowed money, then plowed into inflation sensitive assets, especially real estate. This allowed borrowers to leverage up against their cost basis, and simply wait.
And the President will veto…
If the GSE’s were removed, then the private market would step in.
Hard money lenders are very prevalent in these days.
Terms would be something like 10% to 15% interest at 60% LTV or so.
Of course buyers could pay all cash too.
Essentially prices would probably fall a bit more.
I think a few months ago Bill Gross was saying something about PIMCO would lend at 70% LTV. Either Jim linked the story here or it was on CR.
There would still be home loans, the rate and terms would be different though.
I have videos in the works with local loan reps to discuss the current alternatives in portfolio lending.
@David
10-15% mortgage rates with 60% LTV would equate to an absolute DISASTER in the real estate market. Prices would drop at least 30-40% nationwide, and 50-60% in Southern California. That’s a “bit more” than you probably believe. Right?
What is the quality of the loans they are doing now? Are they good? Its going to take a long time to shake out all the bad ones from before. It may just be a lack of patience or politics on the part of the politicians. Without Fannie and Freddy, there will probably be another signicicant downturn in prices.
@ray
It really doesn’t matter if the loans are quality right now. Reason being, if we have another shock in our credit markets (a lot of smart people are anticipating this), we’re gonna see another decline in home prices, and this will result in more voluntary defaults.
The system we had worked great post WW2 to 1998 … then Wall Street, greed and stupidity took over. We still haven’t fully paid the price for this real estate bubble.
The government & FED would do themselves a big favor, by simply getting out of the way, and allowing prices to fall in a natural way. This moves assets from weak hands, and transfers them into strong hands. We need to start over.