Six senators call on housing regulator to let Congress finish housing finance reform

A group of six bipartisan senators is urging a top housing regulator to leave an overhaul of the financing system to Congress.

Sen. Bob Corker (R-Tenn.) along with five other senators, wrote a letter on Thursday to Federal Housing Finance Agency (FHFA) Director Mel Watt calling on him to refrain from making any policy changes that would remove mortgage giants Fannie Mae and Freddie Mac from government conservatorship without congressional input.

{mosads}”Housing finance reform remains the last major piece of unfinished business of the financial crisis, and recapping and releasing Fannie and Freddie without reform would keep taxpayers on the hook for future bailouts,” said Corker, a member of the Senate Banking Committee.

“It is my hope that Director Watt will avoid any measures that would hinder the ability to pass bipartisan reform legislation in the future,” he said. 

Congress plans to re-engage on the issue in the coming months, with the likelihood of concrete action next year, the letter said.

So in the meantime, lawmakers are asking Watt to continue taking incremental steps to facilitate housing finance reform.

“Over the long run, we all agree changes will be needed to the existing structure,” the senators wrote.

“However, we firmly believe those changes should come through housing finance reform legislation, not unilateral action by this or any future administration,” they wrote.

Sens. Mike Crapo (R-Idaho), Heidi Heitkamp (D-N.D.), Dean Heller (R-Nev.), Jon Tester (D-Mont.), and Mark Warner (D-Va.) signed onto the letter.

In the past couple of months, there has been a push from some in the banking community to let Fannie and Freddie recapitalize their profits to create a buffer against any shocks down the road.  

But some housing industry experts have argued that any attempt by Watt to recapitalize Fannie and Freddie would create a congressional backlash that could threaten the stability of the mortgage giants.

In 2013, Corker, Warner, and a bipartisan group of senators introduced legislation that would replace Fannie and Freddie with a privately capitalized system that preserves mortgage products such as the 30-year loan and protects taxpayers from future economic downturns.

In December, Corker, Warner, and Sens. David Vitter (R-La.) and Elizabeth Warren (D-Mass.), added a provision into the fiscal 2016 appropriations package that prohibits for at least two years the sale of Treasury-owned senior preferred shares of Fannie and Freddie without congressional approval.

“The passage of this provision reasserted the desire of Congress to have a say in determining the fate of Fannie and Freddie,” the senators wrote in the letter.

Fannie and Freddie needed about $188 billion in taxpayer funding to stay afloat during the financial crisis in 2008.