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Industry Leaders Discuss GSE Privatization

The U.S. House Committee on Financial Services Chairwoman Maxine Waters has been a staunch voice advocating on behalf of, in her words, "current homeowners, renters, potential owners, and more than 19 million prospective millennial homeowners." To that end, Waters Friday in a public statement said it would be "entirely inappropriate" for the FHFA, with the assistance of an outgoing Treasury Secretary, to focus on removing Fannie Mae and Freddie Mac from the government conservatorship they have been under since 2008. She encouraged FHFA Director Mark Calabria to stop any attempts to release the GSEs from government oversight. She says that no move in that regard should occur until the new President is sworn in next January.

"At the very least," she added, "the Congress and the American public deserve transparency from you ... I urge you to fully engage with Congress by testifying before our Committee and to immediately halt your efforts to raise the enterprises capital requirements and to release them from conservatorship. You should instead focus on ensuring that renters and homeowners are receiving the help they need during this pandemic."

The Wall Street Journal in November published an article about the current administration's plan to privatize Fannie and Freddie prior to President Donald Trump's exit from the White House.

According to the article, both Calabria and Treasury Secretary Steven Mnuchin have prioritized the conservatorship dissolution, but, the Journal's Andrew Ackerman reported, "how that is done could affect the cost and availability of mortgages backed by the companies, which guarantee roughly half of the $11 trillion in existing home loans."

Former Freddie Mac CEO Don Layton, now a Senior Industry Fellow at Harvard's Joint Center for Housing Studies, has written several papers about the eventual privatization. He acknowledges the process in order to be done correctly will take time. He wrote that the release of Fannie and Freddie "requires the (FHFA), their regulator and conservator, and the US Treasury to both separately and together make decisions and take actions involving extremely large amounts of money in an incredibly complex, never-tried-before process with many political sensitivities.

He continued, "To implement an unprecedented undertaking of this scale and scope, the FHFA and Treasury are, in reality, mostly figuring out how to do it as they go along. To date, even though the implementation of this 'by administrative means' plan began a little over a year ago, it has so far only scratched the surface—and so likely has years to go, with many tough and complex decisions still to be analyzed, made, and implemented."

Waters has held hearings previously to address the topic. In September she called a full Committee hearing entitled, "Prioritizing Fannie’s and Freddie’s Capital over America’s Homeowners and Renters? A Review of the Federal Housing Finance Agency’s Response to the COVID-19 Pandemic," during which she called the FHFA's pandemic response "inadequate."

At the time of publication, Calabria had not publicly responded to Waters' most-recent statement.

About Author: Christina Hughes Babb

Christina Hughes Babb is a reporter for DS News and MReport. A graduate of Southern Methodist University, she has been a reporter, editor, and publisher in the Dallas area for more than 15 years. During her 10 years at Advocate Media and Dallas Magazine, she published thousands of articles covering local politics, real estate, development, crime, the arts, entertainment, and human interest, among other topics. She has won two national Mayborn School of Journalism Ten Spurs awards for nonfiction, and has penned pieces for Texas Monthly, Salon.com, Dallas Observer, Edible, and the Dallas Morning News, among others.
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