Fannie-Freddie release plan draws scrutiny
WASHINGTON – Feb. 5, 2019 – Congressional Democrats, concerned the Trump administration is going it alone to pursue sweeping changes to housing-finance policy, demanded more details on reports that the Treasury Department is formulating a plan to release Fannie Mae and Freddie Mac from federal control.
The scrutiny from House Financial Services Committee Chairwoman Maxine Waters and Senator Sherrod Brown, the top Democrat on the Senate Banking Committee, follows statements from a President Donald Trump-appointed regulator about ending the mortgage giants' decade-long conservatorships.
Joseph Otting, the acting head of the companies' regulator, told Federal Housing Finance Agency (FHFA) staff at a private meeting last week that Treasury and the White House will soon release a proposal. At the meeting, Otting reiterated that Treasury Secretary Steven Mnuchin wants Fannie and Freddie released and that during his stint at FHFA, Otting intends to make progress toward that goal, the FHFA said in a Jan. 18 statement.
"To date, we have not seen a comprehensive statement from the White House and Treasury Department under the Trump administration providing their views on regulation of the housing-finance system," Waters and Brown wrote in a Friday letter to Otting, who is leading the FHFA until a permanent nominee is confirmed by the Senate. "Your comments call into question the independence of the FHFA under your leadership."
Speculation that Otting, who is also the Comptroller of the Currency, and Mnuchin might take action on Fannie and Freddie has spurred a recent stock rally, with both companies more than doubling this year. Still, the Trump administration risks triggering bipartisan criticism if it tries to bypass Congress in releasing them from the government's grip.
Fannie rose 0.34 percent to $2.98 in New York trading Friday, while Freddie gained 1.41 percent to $2.87.
Fannie and Freddie are crucial to the U.S. housing market. The companies buy mortgages from lenders, package them into securities and make guarantees to bond investors in case borrowers default. The U.S. took Fannie and Freddie over during the 2008 financial crisis and injected them with a taxpayer bailout.
Waters of California and Brown of Ohio asked Otting to provide them with "a detailed description of the mission that Treasury and the White House" have for housing-finance policy by Feb. 1.
An FHFA spokeswoman confirmed that the agency received the letter.
Hedge funds, including Paulson & Co. and Pershing Square Capital Management, have been critical of a 2013 move by the Obama administration to send nearly all of Fannie and Freddie's earnings to the Treasury. The funds, which own the companies' shares, would be poised to make substantial profits if the conservatorships ended.
© 2019 Bloomberg L.P; © 2019 Penton Media, National Real Estate Investor, Jesse Westbrook
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