Despite an approaching winter storm and big, fat snowflakesfalling in Washington, the House Financial Services subcommittee onCapital Markets and Government Sponsored Enterprises went forwardwith plans to hear from mostly academic witnesses at a Wednesdaymorning hearing on how government policy at Fannie Mae and Freddie Mac failed homeowners and led to thefinancial crisis.

The House will wrap up its work week early due to the storm,which could bring up to a foot of snow to the nation's capital, andconclude business at 1 p.m. Wednesday.

Fannie and Freddie were placed into conservatorship in September2008.

The Federal Housing Finance Agency's Quarterly Conservator'sReport for October 2012 estimated that the two GSEs' cumulativeTreasury draws by 2015 will range from $191 billion to $209billion.

Democrats and Republicans in Congress, as well as PresidentObama's administration, agree the GSEs must be reformedpost-conservatorship. However, the parties disagree on what shouldbe done.

Obama has said he wants the government to have continuedinvolvement in the housing market, at a minimum providing borrowingassistance to low-income applicants.

House Republicans, however, have been pushing for aprivatization of the housing market ever since they gained controlof the House in 2011. Rep. Jeb Hensarling (R-Texas), Financial Services Committeechairman, introduced bills in 2011 and 2010 that would privatizeFannie and Freddie within two years, immediately raise fees and capthe GSEs' portfolios.

NAFCU Vice President of Legislative Affairs Brad Thaler sent aletter to Rep. Scott Garrett (R-N.J.) and Rep. Carolyn Maloney(D-N.Y.), the respective chair and ranking member on thesubcommittee, which urges the leaders to retain a system thatprovides credit unions with continued access to the secondarymarket and the liquidity it provides.

He listed 10 “core principles” that would ensure credit unionsbe treated fairly during the reform process, including explicitguarantees on the payment of principal and interest on mortgagebacked securities issued by the GSEs.

“The explicit guarantee will provide certainty to the market,especially for investors who will need to be enticed to invest inthe MBSs and facilitate the flow of liquidity,” Thaler said.

A GSE model based on a cooperative or mutual entity was anotherNAFCU suggestion. Each GSE would have an elected board ofdirectors, be regulated by the Federal Housing Finance Agency, andbe required to meet strong capital standards, Thaleroffered.

Although the trade said the GSEs should be self-funded, NAFCUalso stressed that it does not support full privatization of theGSEs because of serious concerns that small, community-basedfinancial institutions could be shut-out from the secondarymarket.