In an apparent about face, Fannie Mae and Freddie Mac's regulator told congressional Democrats Wednesday that he welcomes their input on coming up with a plan to free the mortgage giants from federal control.
"As we begin the journey of evaluating the enterprises and developing a framework for ending conservatorship, I would welcome your insight and perspective,' Joseph Otting, the acting director of the Federal Housing Finance Agency, wrote in a letter to House Financial Services Committee Chairman Maxine Waters and Sen, Sherrod Brown, the top Democrat on the Senate Banking Committee.
Waters and Brown are among lawmakers who raised concerns that the Trump administration was considering going it alone to pursue changes to housing-finance policy. Last week, the Democrats demanded answers from Otting after he said at a private meeting earlier this month that the Treasury Department and White House would soon release a proposal, and that Trump-appointed officials were willing to circumvent Congress to get something done.
The backlash to Otting's comments was swift, with the White House issuing a Tuesday statement that said the administration would work with Congress on a plan for ending the government's decade-long control of Fannie and Freddie.
Speculation that Treasury and the agency might unilaterally let Fannie and Freddie build up capital and then release the companies had prompted the companies' shares to surge this month.
Otting's Wednesday letter is the latest sign that a revamp that frees Fannie and Freddie probably won't happen anytime soon.
Figuring out what to do with Fannie and Freddie, which the government took over during the 2008 financial crisis, has confounded policy makers for more than a decade.
Hedge funds have been hopeful that President Donald Trump would help end the decade-long stalemate for Fannie and Freddie in a way that allows shareholders to get their hands on the companies' profits, which now go to the Treasury. But two years into his term, little progress has been made.
Fannie and Freddie underpin the housing market by buying mortgages from lenders, packaging them into securities and offering bond investors guarantees in case borrowers default. The companies backstop nearly $5 trillion in mortgage bonds, which keeps borrowing costs low and helps make loans readily available.
The Trump administration's push to end the conservatorships will likely start with the White House calling on federal agencies to put forth ideas for a legislative and regulatory overhaul of the housing-finance giants, Bloomberg reported Tuesday, citing people familiar with the matter.
The White House may outline a broad set of recommendations, such as increasing competition for the companies and protecting taxpayers from losses, and then request that Treasury and the Department of Housing and Urban Development propose plans for implementing them, said the sources.
There are some aspects of what the White House is considering that would be good news for hedge funds. For example, officials have discussed allowing Fannie and Freddie to hold more capital, the people said. But the White House hasn't endorsed an approach that would let Treasury and the Federal Housing Finance Agency permit the companies to build up bigger capital buffers and then free them from federal control, the people said.
Information for this article was contributed by Joe Light of Bloomberg News.
Business on 02/01/2019