The full House Financial Services Committee assembled Wednesdayfor a hearing that examined the mortgage finance systems of othercountries that don't rely upon government-sponsored entities like Fannie Mae or FreddieMac.

The hearing featured academic witnesses from three Californiauniversities, New York University and an American EnterpriseInstitute fellow.

The hearing was the 1oth so far this year for the full committeeor subcommittees that have explored housing policy reform, ChairmanJeb Hensarling (R-Texas) said in his opening remarks.

“Notwithstanding the damage they have caused in their checkeredpast, many cannot conceive of a housing finance market withouta government-guaranteed Fannie andFreddie,” Hensarling said.

He said that while the U.S. is practically alone in the modernindustrialized world in having GSEs directly guarantee mortgagesecurities and the level of government subsidy and intervention inthe housing market, the U.S. leads the world in foreclosurerates.

“In other words, only in America can you find a government thatsubsidizes housing more, so that we the people can get less,” hesaid.

Hensarling has been publicly vocal with his desire to privatizeat least part of the secondary mortgage market. In April, he saidthe first step to a sustainable housing policy would be theelimination of Fannie and Freddie government guarantees.

Wednesday, he urged his fellow lawmakers to consider alternativemodels for GSEs.

“We shouldn't preserve Fannie and Freddie's federal guaranteejust because we have done so in the past. We shouldn't preserve thefederal guarantee just because those who believe they profit fromthe status quo urge us to continue doing so,” he said.

Predictably,committee Ranking Member Maxine Waters (D-Calif.) disagreed.

“The hearing is titled, 'Examplesof Successful Housing Finance Models Without Explicit GovernmentGuarantees,'” Waters said in her opening remarks. “However, if weare to be honest, it should more properly be titled, 'Examples ofOther Housing Finance Models with Other Forms of GovernmentGuarantees.'”

For example, she said, covered bonds enjoy preferential statusin terms of regulatory and capital treatment in Europe. And, whileother countries may invest fewer resources in homeownership, Waterssaid, they also make more significant investments in public andassisted rental housing.

Waters said she supports reform so long as it preserves the30-year, fixed-rate mortgage in the U.S.

“I think the recent crisis has demonstrated that this is astable product, which has actually outperformed the exoticmortgages that proliferated in the lead-up to the financialcrisis,” she said. “If we eliminated a government role inhousing finance, these exotic products would likely againpredominate.”

In advance of the hearing, NAFCU Executive Vice President ofGovernment Affairs Dan Berger sent a letter Tuesday to Hensarlingand Waters, stressing the need for secondary mortgage market reformthat would ensure continued access for credit unions and fairpricing based upon loan quality.

“Along with access to a healthy and viable secondary mortgage market, fair pricing is equally as criticalin ensuring community-based financial service providers are notdiscriminated against based on type of institution, aninstitution's asset size or any other geopolitical issues,” Bergerwrote in the letter.