WASHINGTON President Obama will urge lawmakers on Tuesday to pursue a bipartisan housing finance reform plan that will protect American middle-class families and put an end to future taxpayer bailouts.
Obama, who will be speaking in Phoenix as part of a string of campaign-style speeches on the economy, is expected to lay out his must-haves in any future housing reform plan that he will require to ultimately sign off on any bill. Topping the list will be putting private capital at the center of any future housing finance system, clearly spelling out any government role, and ensuring access to credit for creditworthy borrowers.
The president vowed late last month to revamp the current system and take a new approach to help strengthen homeownership in the U.S.
"We'll work with both parties to turn the page on Fannie Mae and Freddie Mac and build a housing finance system that's rock solid for future generations," Obama said in a speech at Knox College in Illinois on July 24.
Since a 2011 white paper on housing finance reform, the White House has kept largely mum on the subject. But with momentum building on Capitol Hill, the Obama administration has been increasingly working behind the scenes to push reform of the government-sponsored enterprises.
"The president and his housing economic team have been working for a long time on the issue of GSE reform," said a senior administration official in a conference call with reporters ahead of the president's speech in Arizona.
Senior administration officials said the president's intention is to lay out his principles that he will use to judge the type of legislation that will be acceptable to him.
"We look forward to working with a bipartisan group to reach something that is fully consistent with the president's principles," said the official.
The administration has endorsed a bill by Sens. Bob Corker-R-Tenn. and Mark Warner, D-Va., but has also suggested there are areas "where that approach needs to go further or needs to be adjusted."
"We've seen good progress and good willingness to work together," said the senior administration official, naming a bipartisan effort by the Senate Banking Committee led by Chairman Tim Johnson, D-S.D. and Mike Crapo, R-Idaho.
The White House has not specifically weighed in on the Republican-led effort by House Financial Services Committee Chairman Jeb Hensarling, R-Texas, and Rep. Scott Garrett, R-N.J. But officials did make clear that the president sees a need for a "limited and targeted role for a catastrophic guarantee," which would run counter to the GOP's housing reform bill.
Obama is also expected to outline intermediate steps the administration can take now as it awaits action by Congress.
"The president wants to make clear that while we believe we should pursue this type of legislation, there are intermediate steps to be taking to transition to a new housing finance system," the official said.
For example, Obama will continue to push for: aggressively winding down Fannie Mae and Freddie Mac's investment portfolio's by at least 15% each year; prioritizing the development of a securitization platform, an effort led by the Federal Housing Finance Administration; reducing loan limits; and gradually shrinking Fannie and Freddie's multifamily footprint.