President Barack Obama has his own plan to eliminate Fannie Mae and Freddie Mac and replace them with a private secondary mortgage market.
Obama's plan would put him in opposition to House Democratic leaders and some Senate Democrats who have opposed efforts to wind down the GSEs.
Although the White House has not yet released a copy of the speech, to be delivered Tuesday in a Phoenix appearance, news outlets were reporting that Obama’s plan does look a lot like The Housing Finance Reform and Taxpayer Protection Act, introduced in June by Sen. Bob Corker (R-Tenn.) and Sen. Mark Warner (D-Va.).
S. 1217 would wind down Fannie Mae, Freddie Mac and the FHFA within five years. Private investors would purchase mortgages from lenders and repackage them as securities.
The FHFA’s functions would be transferred to a newly created Federal Mortgage Insurance Corp., which Warner’s office said would be modeled after the FDIC and would mandate that investors retain 10% capital to protect against future bailouts.
The House Financial Services Committee passed a bill on July 24 that would also privatize the secondary market and eliminate Fannie and Freddie. The Protecting American Taxpayers and Homeowners Act includes many of the same provisions as the Corker-Warner bill, but would also allow Federal Home Loan Banks to serve as mortgage aggregators, packaging individual mortgages for the private securities market. That bill now heads to the House floor, where it has Republican majority support.
White House officials told reporters Monday that Obama’s plan would limit the government’s involvement in mortgage finance to a government guarantee or some form of insurance, and regulatory oversight.