For several decades, whenever a question of housing policy came up in Washington, two companies dominated. Fannie Mae and Freddie Mac marshaled armies of lobbyists, deep political connections and millions of dollars in contributions to get their way.
But now Fannie Mae and Freddie Mac, titans of the mortgage finance industry, are wards of the state, bailed out by Washington to the tune of $160 billion and banned from political activity. As the Obama administration and Congress prepare to take up overhauling the $12 trillion U.S. mortgage market, new interests are shaping the debate like never before.
Among those influencing many Democrats are affordable housing advocates and liberal think tanks that want the government to do less to foster homeownership and more to support rental housing for low-income people. Those influencing Republicans favor sharply reducing all federal support for housing.
In the past, Fannie and Freddie found backers on both sides of the political aisle. Key Democrats in Congress and in the Clinton administration were their most ardent supporters. President George W. Bush touted an “ownership society,” relying on Fannie and Freddie to help low-income people buy homes.
Officials from both parties now agree that the housing finance system is unsustainable; virtually all new home loans are guaranteed by Fannie, Freddie or the Federal Housing Administration, putting taxpayers on the line. Administration officials say they still believe in a significant government role in promoting home ownership, but one less expansive than under previous presidents. Republicans, who have introduced legislation to get rid of Fannie and Freddie altogether, might not vote for an overhaul that retains any government role in housing.
On Aug. 17, the Treasury Department is hosting a conference of financial companies, housing advocates, academics and other interested parties to begin discussing how to design a new system that doesn’t rely as much on taxpayers. The Obama administration is required to make a proposal by January under the bill recently passed by Congress to reshape financial regulation.
Continue Reading…Washington Post
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