Fannie Mae-No Politics (FNMA)

[Dallas66]

Pressure grows for Fannie Mae and Freddie Mac wind-down

By Gina Chon in Washington

http://www.ft.com/intl/cms/s/0/afcbfd88-bddd-11e3-83e5-00144feabdc0.html#axzz2yDGrDm7R


An organisation committed to winding down mortgage finance groups Fannie Mae and Freddie Mac launched on Monday with a call for the US government to respect investors’ rights as more groups push mortgage finance reform on to the agenda for the November midterm elections.

The Coalition for Mortgage Security, which includes former housing and urban development undersecretary Ken Blackwell as one of its directors, declined to provide information about its funding but echoed the views of several hedge funds fighting the government over the value of their shares.

Under the 2012 revised terms of the $188bn bailout of Fannie and Freddie, all of the income from the companies must go to the US government.

Bruce Berkowitz’s Fairholme Funds and other investment funds that are shareholders of the companies are suing the US government over those changes. The coalition said the government should “reverse course and abide by the original terms of the deal that respects the rights of investors, as well as property owners”.

“The rule of law is the basis for American capitalism and must be acknowledged and respected in order for properly functioning capital markets,” said the coalition, which is launching a national media campaign this week. “The rules of the game cannot be changed in the middle of an inning.”

There are several bills in Congress that would wind down Fannie and Freddie, but most of them do not address how investors would be paid. None of the bills may pass this year, but interested parties are still setting themselves up to be part of the debate next year.

Last Monday a conservative group called the 60 Plus Association launched a media campaign targeting senators who supported one of the bills eliminating Fannie and Freddie, saying investors need to be protected.

US senators on the banking committee are scheduled to vote at the end of this month on a bill sponsored by the top Democrat and Republican on the banking committee, Tim Johnson and Mike Crapo.

The 60 Plus group called the Johnson-Crapo bill the Obamacare of the mortgage industry, comparing the structures that would have to be formed to support the housing finance system to the contentious health insurance infrastructure created by US president Barack Obama.

The 60 Plus group is using advertisements to target Republicans Mr Crapo, Dean Heller, and Mark Kirk, as well as Democrats Mark Warner, Joe Manchin, Kay Hagan and others.

“We’re asking these senators to not bring Obamacare to the mortgage industry and to allow Fannie and Freddie shareholders to recoup the investments that are lawfully theirs,” said Jim Martin, chairman of 60 Plus.

The companies are one of the last remaining flashpoints of the 2008 financial crisis. But recently they made payments to the Treasury that now exceed their bailout amount, which has made some experts question whether they should be eliminated.

The Coalition for Mortgage Security said it wanted to see Fannie and Freddie replaced by private companies not given any special privileges, but it also sought to ensure the continuation of the 30-year fixed rated mortgage.

The group said it did not plan to take a position on any of the Fannie-Freddie bills in Congress. Instead, it was focused on protecting property rights and ensuring “Americans never again have to relive the 2008 housing crisis that forced millions of families from their homes”.