Tag Archives: GSE Reform

Obama Administration officials such as Treasury Secretary Jack Lew have warned in the last month that such a “recap and release” program for Fannie Mae and Freddie Mac would put the GSEs at risk of another bailout; however, the GSEs’ Q3 earnings reports showed a $475 million net loss for Freddie Mac and a decline of more than 50 percent in Fannie Mae’s quarterly net income (from $4.6 billion in Q2 down to $2 billion in Q3), prompting their boss, FHFA Director Mel Watt, to declare that they may need a bailout anyway.

Swann and his team wrote in a report to clients that the impasse among lawmakers as to the future of the GSEs, the fact that Fannie Mae and Freddie Mac have been profitable since 2012, and the near recovery of most housing markets have made the privatization of the GSEs or any type of reform unlikely for the foreseeable future.

The event highlighted GSE reform and conservatorship, the need for more private capital in the financial system and to transfer risk away from taxpayers and GSEs, focusing on risk sharing, specifically “front-end,” which makes housing finance more sustainable.

Appearing as panelists in a discussion at the Bipartisan Policy Center this week titled "Housing Finance Reform: A Status Report," U.S. Congressmen Randy Neugebauer (R-Texas) and John Delaney (D-Maryland) both agreed a major reason why such reform has not happened is because the White House has not made it a top priority.

Holtz-Eakin, former director of the Congressional Budget Office, wrote on the American Action Forum's blog, "The Daily Dish," earlier this week that logic would dictate large reforms to the housing finance system following the crash, yet no such large reform has taken place.

With GSE reform a hot topic among government officials and those in the housing industry, the Federal Reserve Bank of New York has issued a report stating that the "path forward for reform of Fannie Mae and Freddie Mac does not look promising" and that failure to wind down the GSEs equated to a "colossal missed opportunity" to put U.S. residential housing finance on more stable footing.

Fannie Mae and Freddie Mac required a combined taxpayer bailout of $188 billion in 2008 after the government seized control of them. The two GSEs returned to profitability in 2012. The future of the two GSEs has been a hotly contested topic in Washington as well as in the rest of the housing industry. Both parties appear to want to wind down the FHFA's conservatorship of the two, but cannot agree on what, if anything, should replace them as well as what role the government should play in housing, if any.

President Barack Obama is scheduled to speak about the U.S. housing market at Central High School in Phoenix, Arizona, according to multiple reports. Neither the president nor the White House has publicly announced exactly what he will speak about with regards to the housing market on Thursday.

Now that the Republicans will have a majority in both the House and the Senate and a Republican-led Senate Banking Committee in January, it has been widely speculated that GSE reform will be near the top of their to-do list. Richard Shelby (R-Alabama) will become the new chair of the Senate Banking, Housing, and Urban Affairs Committee in January. He previously served as the committee chair from 2003 to 2007 and is a longtime proponent of reforming the conservatorship model.

The Kroll Bond Rating Agency recently released a study saying it does not believe there will not be any GSE reform for the housing finance market until at least 2016 and that lenders and investors should operate as if they do not expect such reform to happen for many years.