House Financial Services Committee Republicans are working aggressively on reshaping mortgage giants Fannie Mae and Freddie Mac through massive legislative efforts. One step includes the passing of 16 more bills in addition to the eight already being heard by the Committee.
The government funded home mortgage providers were intentionally excluded from the Dodd–Frank Wall Street Reform and Consumer Protection Act signed into law by President Barack Obama on July 21, 2010. However, the law did require the Treasury to submit a white paper in regards to the future of the mortgages issuers.
That document was created and addressed specific issues such as what entities (private vs. government or a hybrid) will fund the mortgage market at large and the future role of the government. Based on that research the Treasury Option has outlined three options for Fannie Mae and Freddie Mac. While those options are currently being weighed, the house majority is trying to force change of their own.
The Republican Bills
While the details of the 16 additional bills are scarce, the Republicans have stated they will work in conjunction with the eight previously submitted pieces of legislature to address their future vision of Freddie and Fannie. The initial documents contain revisions targeting affordable housing programs expectations, executive compensation and capping the agencies current portfolios (HousingWire.com).
Some of the proposals were actually a re-introduction of a policy proposed more than three years ago. If passed, the GSE Bailout Elimination and Taxpayer Protection Act would stop funding of the Government-Sponsored Enterprise (GSE), break the relationship with the agencies and get the government out of the mortgage industry in two years.
The measure was originally presented as an amendment to the Dodd-Frank Act by Representative Jeb Hensarling (R-Texas) but was not part of the law that was passed. The foundation for all the bills proposed by is based on the recommended action of the government to stop funding the agencies and to eliminate the conservative relationship in two years.
Changes On Hold Until Full Picture
As the Republicans take this proactive approach to the home loan industry giants, industry insiders and politicians prefer to get a full picture of the scenario. National Association of Home Builders and the National Association of Realtors formally requested that Congress put the break on the fragments of activity and instead, present plans in one organized proposal. Additionally, politicians from the other side of the fence are also requesting uniformity in regards to the change.
Representative Barney Frank (D-Massachusetts) has also suggested that the current proposals do not fully address the issue of what can potentially replace the mortgage giants. Currently, 90 percent of all new mortgages are supported by Fannie, Freddie and other federal programs (New York Times). Fannie and Freddie presently hold $5 trillion in national mortgage debt.
The End is Near
Both parties agree that dismantling and building a new improved version of Fannie and Freddie is a must for the solvency of the nation. While the terms of how have yet to be agreed upon, it is expected that once the organizations evolve, the mortgage industry will be unrecognizable.
Predictions for the future of the mortgage industry includes that all loans will require larger down payments in order to be approved, the disappearance of traditional 30-year fixed rate loans and higher interest rates.
Consumers will have to wait several years before any changes roll out. Until then, consumers can find a large selection of home loans in order to finance their version of the American Dream. One of the best resources for the task is Mortgage Marvel, the industry's premiere mortgage rate origination. Consumers can find the best rates in the area, simply by entering the mortgage area zip code.
