Bipartisan consensus may seem particularly evanescent these days, but here’s something the 112th Congress, split or not, can address: Government Sponsored Entity reform. The news today from the Federal Housing Finance Agency that mortgage giants Fannie Mae and Freddie Mac could end up needing as much as $363 billion in government help by 2013 is hair-raising at best.
The Treasury Department study mandated by Dodd-Frank on how to extract the government from this mess is due to Congress by January 31 of next year. Regardless of whether it’s Barney Frank, Spencer Bachus or someone else at the helm of the House Financial Services Committee, everybody seems to agree that things need to change. As I wrote back when Dodd-Frank passed, it’s a matter of when not if. In the mean time, here’s what that study is supposed to be considering:
(A) the gradual wind-down and liquidation
of such entities;
(B) the privatization of such entities;
(C) the incorporation of the functions of
such entities into a Federal agency;
(D) the dissolution of Fannie Mae and
Freddie Mac into smaller companies; or
(E) any other measures the Secretary determines appropriate.
(2) ANALYSES.—The study required under paragraph (1) shall include an analysis of—
(A) the role of the Federal Government in supporting a stable, well-functioning housing finance system, and whether and to what extent the Federal Government should bear risks in meeting Federal housing finance objectives;
(B) how the current structure of the housing finance system can be improved;
(C) how the housing finance system should support the continued availability of mortgage credit to all segments of the market;
(D) how the housing finance system should be structured to ensure that consumers continue to have access to 30-year, fixed rate, pre-payable mortgages and other mortgage products that have simple terms that can be easily understood;
(E) the role of the Federal Housing Administration and the Department of Veterans Affairs in a future housing system;
(F) the impact of reforms of the housing finance system on the financing of rental housing;
(G) the impact of reforms of the housing finance system on secondary market liquidity;
(H) the role of standardization in the housing finance system;
(I) how housing finance systems in other countries offer insights that can help inform options for reform in the United States; and
(J) the options for transition to a reformed housing finance system.