WASHINGTON–Despite the partisan divide in Congress, one Democrat and one Republican are reaching across the aisle in an attempt to resolve the question of what to do about Fannie Mae and Freddie Mac.
Both companies have been operating under government conservatorship since 2008, and now potentially face needing additional taxpayer support.
Sen. Bob Corker (R-TN) and Sen. Mark Warner (D-VA) said they have been meeting with industry groups and others to find a common ground on the two mortgage giants. Bloomberg reported that Sen. Banking Chairman Mike Crapo (R-ID) has also begun to hold housing-finance briefings with the idea of finding some sort of compromise.
After being seized by regulators in 2008, the two companies were bailed out with $187.5 billion in Treasury funds and the mortgage market melted. Both companies are now profitable, with the federal government taking the largest share. But under the terms of their bailout, they can’t retain any capital starting next year, meaning taxpayers would have to cover any losses.
This is the second time Corker and Warner have sought to find a workaround, and there are long odds in the current Congress, with many Republicans preferring both companies to be sold off. Many Democrats want Fannie and Freddie’s affordable housing mandates to remain in place.
Fannie and Freddie hold about 40% of the nation’s home loans.
Bloomberg reported that most recently the Mortgage Bankers Association put forward a plan calling for turning Fannie and Freddie into privately owned utilities with a capped rate of return and strict capital standards. Another plan offered by ex-Federal Housing Finance Agency Director Edward DeMarco and former Corker staffer Michael Bright would make them mutual companies, owned by lenders, that would sell insurance against defaults instead of buying and securitizing mortgages, Bloomberg said.