Fannie Mae-No Politics (FNMA)

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FHFA Won’t Rule Out Ending Fannie, Freddie Oversight Without Congress

After the hearing, he told reporters that any effort by federal authorities to end the conservatorship would need to be begun by the Treasury Department. “It’s something that would have to be initiated by Treasury, not by me,” Mr. Watt said. “In the short term I would rule it out, in the long term, I might not rule it out.”

http://online.wsj.com/articles/senator-calls-for-fhfa-to-end-fannie-freddie-conservatorship-1416411254


Director Melvin Watt Says Process Would Have to Be Initiated by Treasury Department
By JOE LIGHT

A top housing regulator on Wednesday wouldn’t rule out the possibility that the federal government would end its conservatorship of mortgage-finance companies Fannie Mae and Freddie Mac if Congress doesn’t do so.

Federal Housing Finance Agency Director Melvin Watt said during a hearing of the Senate Banking Committee on Wednesday that overhauling the housing-finance system should be left to Congress. He expressed hesitation at giving his own thoughts on how Congress should proceed.

After the hearing, he told reporters that any effort by federal authorities to end the conservatorship would need to be begun by the Treasury Department. “It’s something that would have to be initiated by Treasury, not by me,” Mr. Watt said. “In the short term I would rule it out, in the long term, I might not rule it out.”

A Treasury spokesman didn’t immediately respond to a request for comment.


Fannie Mae and Freddie Mac were placed in conservatorship by the U.S. government in 2008 after the housing crisis precipitated massive losses at the two companies. The government provided Fannie and Freddie with nearly $188 billion in aid. Now, nearly all of the companies’ profits are swept to the U.S. Treasury.

Mr. Watt’s comments came after Sen. Tim Johnson (D., S.D.) in his opening remarks called on him to “engage with the Treasury Department in talks to end the conservatorship” of Fannie and Freddie if Congress doesn’t proceed.

Mr. Johnson, who chairs the banking committee, sponsored legislation that would overhaul the housing-finance system. That bipartisan bill passed the committee in May but garnered only limited support and didn’t proceed to the Senate floor. Some Democrats have said the proposal didn’t go far enough to promote affordable housing. Mr. Johnson is retiring this year.

Mr. Watt said during the hearing that he believes Congress should be responsible for housing-finance reform. “Conservatorship cannot and should not be a permanent state. The role of Congress is to define what the future state is,” he said.

‘Conservatorship cannot and should not be a permanent state. The role of Congress is to define what the future state is.’
—Federal Housing Finance Agency Director Melvin Watt, during a hearing of the Senate Banking Committee on Wednesday.
Sen. Johnson’s comments come as the likelihood of Congress tackling housing-finance reform dwindles, despite calls from the Obama administration and others for Congress to act. Last week, Julián Castro, the secretary of the Department of Housing and Urban Development, at a conference urged lawmakers to “get housing finance reform done, once and for all.”

At the hearing, Sen. Mike Crapo (R., Idaho), who co-sponsored the legislation with Mr. Johnson, said the “ultimate goal of enacting legislation is not going to be achieved in this Congress.”

“My largest concern is…the perception that the old status quo is starting to take hold again,” he continued. Mr. Crapo said that Mr. Watt’s role should be to be as a bridge until congressional action, a statement with which Mr. Watt said he agreed.

During the hearing, senators questioned Mr. Watt on a range of issues under the FHFA’s purview, including about how the agency planned to change the mortgage fees charged by Fannie and Freddie and whether or not Mr. Watt considered allowing the agencies to reduce the mortgage principal of borrowers who owe more than their homes are worth.

Mr. Watt said he expected to make a decision on the fees in the first quarter of next year. He said that deciding whether and how to allow principal reduction was “the most difficult issue that I’ve faced as director.”

In response to a question from Sen. Dean Heller (R, Nev.) on how Mr. Watt thought Congress should change the housing finance system, Mr. Watt said, “It is Congress’ role to tell us what the future of [Fannie and Freddie] reform is...If the committee is expecting me to have a position on what the future of housing [Fannie and Freddie] reform should be, it will be sorely disappointed.”