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Key House Republican praises Obama housing plan

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The Obama administration's plan to gradually dissolve ailing housing giants Fannie Mae and Freddie Mac and to shrink the government's role in the mortgage market drew praise from House Republicans on Tuesday. The GOP chairman of the House Financial Services Committee called the proposal a good starting point for bipartisan negotiations over a housing overhaul.

The positive reaction came as Treasury Secretary Timothy Geithner told the committee that the Obama administration wants Congress to approve legislation within two years that would slowly dismantle Fannie and Freddie.

"Our hope is Congress will work with us to find a consensus for a long-term solution," Geithner told the lawmakers.

The positive words came at a hearing held three weeks after the Obama administration released a report calling for a stark reduction of the federal role in housing. The nation's housing market has been battered in recent years by low home prices and vast numbers of foreclosures, and politicians from both parties want to find a way to have private lenders — not the government — bear more of the burden.

"You don't want to run a system where the taxpayer is on the hook when things go bad," Geithner said.

Even so, it is unclear whether major legislation such as this could be approved during next year's presidential election campaign, when partisan divisions intensify.

Fannie and Freddie guarantee or own about half of all U.S. mortgages. Along with other federal agencies, they played a role in nearly 9 of 10 new mortgages over the past year, as private lenders have remained nervous about making new loans. The two companies nearly collapsed in 2008 as the housing market crumbled, but have been kept alive with $150 billion — so far — in taxpayer dollars.

As part of its plan for slowly eliminating Fannie and Freddie, the administration wants to lower the size of mortgages they can buy and raise the fees it charges — proposals designed to help private lenders move back into the mortgage market.

"The cost of a mortgage is going to be higher in the future," Geithner said.

In a written statement aides distributed at the hearing, committee Chairman Spencer Bachus, R-Ala., said the administration had included many GOP ideas in its plan.

"House Republicans are ready and willing to sit down with you, Mr. Secretary, and other administration officials, and our Senate colleagues as soon as possible to craft legislation to produce a comprehensive housing finance reform plan," it said.

Rep. Scott Garrett, R-N.J., another member of the committee, also noted the common ground between Republicans and the administration's plan, including the phase out of Fannie and Freddie and the move toward a privately financed mortgage system.

"I believe there is an opportunity for us to reach broad based consensus," Garrett said.

Democrats, many of whom have worried that the administration plan will make it harder for many families to get mortgages, spent less time praising Geithner.

The top Democrat on the committee, Rep. Barney Frank, D-Mass., criticized Republicans for failing to rally behind a single bill overhauling Fannie and Freddie, noting that the GOP criticized Democrats severely last year when the two companies were ignored by the financial overhaul law they enacted.

And Rep. David Scott, D-Ga., suggested the administration's plan might risk a situation where the private lending market does not provide enough money for the demand for mortgages.

Geithner warned the committee that a failure by Congress to enact legislation in two years would worry the financial markets and leave serious problems unaddressed.

In an apparent warning to some Republicans who want to quickly pull the government out of its role in supporting the mortgage system, Geithner also warned in his prepared statement that acting too fast would hurt as well.

While we are confident that the steps we have laid out follow the right path, haste would be counterproductive — possibly destabilizing the housing finance market or even disrupting the broader recovery," Geithner said.

Congress is trying to decide how to reshape the federal role in the housing market, which remains weak, with low prices and huge numbers of foreclosures in Florida, parts of the Southwest and other regions. While both political parties concede that changes are needed to protect taxpayers and revive private lending, Republicans tend to want to move more strongly while Democrats express more concerns about maintaining the government's role in helping lower-income families.

To wind down Fannie's and Freddie's roles in the market, the administration also wants to take steps for which it does not need congressional action, such as decreasing the size of loans the two companies may buy. Geithner also reiterated administration plans to constrict the Federal Housing Administration's role in making loans. Some Democrats and consumer advocacy groups have complained that such actions will make it harder for many families to purchase homes.

The administration's report offered three options for overhauling Fannie and Freddie. One would limit the government to helping poor and middle-class borrowers through agencies like the FHA. The second would have the government back private mortgages, but mostly during times of economic crisis. The third would have the government "reinsure" some mortgage investments that are already guaranteed by private insurers.

The two companies buy mortgages from banks and other primary lenders, package them together and sell them with a guarantee that investors would be repaid in case of default. That system helps keep interest rates lower and provides lenders with fresh cash to make additional loans.

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  • the wolf back in the chicken coop
    Obama,Barney Frank and Chris Dodd are the main reason we had the housing crisis.The Government allowing loans to buyers that had no incomes. The media just plain wants to forget that fact. Anything they have to do with the fix, will damn sure cost the taxpayers more. Not everyone in America can afford a house, wants to own one, or should own one.
    The illegals in Chicago found out they could get a loan,0% down, live in a nice house for more than 2 years and not pay a darn dime before getting the boot. They said "why would we rent amigo"!
    This country is great. Lets go back and have the local banks make the loans,like they did before, even if you have to put 10- 20 % down.
    If you have some skin in the property, you will be a better buyer. The retired folks might even make more that .05% interest on their Money market accounts or CDS's and be able to eat again.
  • What did Obama Dream up to Replace Them?
    All of us know that Obama would never takes steps to get the government out of the housing market! There's a catch! Whatever it will be, you can rest assured that it will be bigger, more socialist, will increase the national debt, and deliberately dimantle our democracy. This is NOT good news people! Wake up! NOW!!!!

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  1. Cramer agrees...says don't buy it and sell it if you own it! Their "pay to play" cost is this issue. As long as they charge customers, they never will attain the critical mass needed to be a successful on company...Jim Cramer quote.

  2. My responses to some of the comments would include the following: 1. Our offer which included the forgiveness of debt (this is an immediate forgiveness and is not "spread over many years")represents debt that due to a reduction of interest rates in the economy arguably represents consideration together with the cash component of our offer that exceeds the $2.1 million apparently offered by another party. 2. The previous $2.1 million cash offer that was turned down by the CRC would have netted the CRC substantially less than $2.1 million. As a result even in hindsight the CRC was wise in turning down that offer. 3. With regard to "concerned Carmelite's" discussion of the previous financing Pedcor gave up $16.5 million in City debt in addition to the conveyance of the garage (appraised at $13 million)in exchange for the $22.5 million cash and debt obligations. The local media never discussed the $16.5 million in debt that we gave up which would show that we gave $29.5 million in value for the $23.5 million. 4.Pedcor would have been much happier if Brian was still operating his Deli and only made this offer as we believe that we can redevelop the building into something that will be better for the City and City Center where both Pedcor the citizens of Carmel have a large investment. Bruce Cordingley, President, Pedcor

  3. I've been looking for news on Corner Bakery, too, but there doesn't seem to be any info out there. I prefer them over Panera and Paradise so can't wait to see where they'll be!

  4. WGN actually is two channels: 1. WGN Chicago, seen only in Chicago (and parts of Canada) - this station is one of the flagship CW affiliates. 2. WGN America - a nationwide cable channel that doesn't carry any CW programming, and doesn't have local affiliates. (In addition, as WGN is owned by Tribune, just like WTTV, WTTK, and WXIN, I can't imagine they would do anything to help WISH.) In Indianapolis, CW programming is already seen on WTTV 4 and WTTK 29, and when CBS takes over those stations' main channels, the CW will move to a sub channel, such as 4.2 or 4.3 and 29.2 or 29.3. TBS is only a cable channel these days and does not affiliate with local stations. WISH could move the MyNetwork affiliation from WNDY 23 to WISH 8, but I am beginning to think they may prefer to put together their own lineup of syndicated programming instead. While much of it would be "reruns" from broadcast or cable, that's pretty much what the MyNetwork does these days anyway. So since WISH has the choice, they may want to customize their lineup by choosing programs that they feel will garner better ratings in this market.

  5. The Pedcor debt is from the CRC paying ~$23M for the Pedcor's parking garage at City Center that is apprased at $13M. Why did we pay over the top money for a private businesses parking? What did we get out of it? Pedcor got free parking for their apartment and business tenants. Pedcor now gets another building for free that taxpayers have ~$3M tied up in. This is NOT a win win for taxpayers. It is just a win for Pedcor who contributes heavily to the Friends of Jim Brainard. The campaign reports are on the Hamilton County website. http://www2.hamiltoncounty.in.gov/publicdocs/Campaign%20Finance%20Images/defaultfiles.asp?ARG1=Campaign Finance Images&ARG2=/Brainard, Jim

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