WASHINGTON The regulator for Fannie Mae and Freddie Mac, who is fighting for his political life, urged Congress to speed up the pace of reform of the two mortgage giants and open the door for the entry of private capital into the secondary mortgage markets.
“The U.S. housing finance system cannot really get going again until we remove this cloud of uncertainty and it will take legislation to do it,” Ed DeMarco, director of the Federal Housing Finance Agency, told the House Financial Services Committee yesterday.
DeMarco, a Bush administration holdover, has been pushing for greater privatization of the secondary mortgage market and an eventual wind-down of the two government sponsored enterprises.
“I have been observing a developing consensus among private market participants that the conforming conventional mortgage market cannot operate without the American taxpayer providing the ultimate credit guarantee for most of the market,” DeMarco said.
“That clearly is one policy outcome, but I do not believe it is the only outcome,” he said. “I believe it is possible to rebuild a secondary mortgage market that is deep, liquid, competitive, and operates without an ongoing reliance on taxpayers or, at least, a greatly reduced reliance on taxpayers.”
DeMarco’s remarks came one day after attorneys general in nine states called the agency director an impediment to resolving the ongoing foreclosure crisis and called on President Obama to fire him. Several Democrat lawmakers also have called for the president to replace DeMarco because of his opposition to some of the administration’s policies, such as seeking principal markdowns for underwater loans held by Fannie and Freddie.
Both Democrats and Republicans seem to agree the two mortgage giants need to be wound down, but most Democrats still see a government role in maintaining the secondary market. Republicans tend to favor a privatization of the roles that Fannie and Freddie play.
Yesterday, DeMarco told lawmakers he is attempting to simplify Fannie’s and Freddie’s combined book of business, in which the companies own or guarantee about $5 trillion in mortgages. He said a gradual reduction of the government’s overall footprint in the market would be a multi-year venture.
Financial Services Chairman Jeb Hensarling of Texas said he plans to move forward on legislation to encourage more private capital back into the market and reform the housing finance system.
The renewed interest in GSE reform comes after Freddie Mac reported its first fiscal profit since 2008 and Fannie Mae is expected to do likewise by the end of this week.
