In his first annual report to Congress, Federal Housing Finance Agency Director Mark Calabria asked that Congress pass legislation regarding housing finance reform that would allow industry giants Fannie Mae and Freddie Mac to return, once again, to private ownership.
The FHFA has served as regulator and conservator of Fannie Mae and Freddie Mac for more than a decade, a length of time that Calabria acknowledges few people would have predicted.
“Reform remains overdue, despite prior efforts, and we should view this task with some urgency. I encourage Congress to pursue legislation to move our country toward a more sustainable housing finance system,” Calabria wrote. “These reforms should reduce the risk to the taxpayer, promote private sector competition, and support sustainable homeownership.”
In spite of numerous efforts, lawmakers have been unsuccessful in revising the role of Fannie Mae and Freddie Mac. Calabria officially became the director of the FHFA two months ago, and has since urged lawmakers on both sides of the aisle to end the conservatorship that began after the housing crash in 2008, which is when regulators took control of the two companies.
Calabria wants Congress to empower the FHFA to charter new competitors for Fannie and Freddie. He’s also seeking expanded oversight authority over firms that support the housing market, including nonbank mortgage servicers, citing similar powers granted to agencies such as the Federal Deposit Insurance Corp.
Calabria has said that he would do everything within his authority to strengthen the housing finance system. He said this meant removing Fannie and Freddie from conservatorship, because that measure was only intended to be a short-term solution in order to make sure the market continued to function through the aftermath of the downturn.
“They are now of unprecedented duration and scope and leave the mortgage market, and American taxpayers, vulnerable to another market downturn,” he wrote.
He has previously said that Fannie and Freddie could be freed even without Congressional action.
Although the language is firm and clear, the recommendations and messaging of Calabria’s letter weren’t anything new, according to Cowen analyst Jaret Seiberg.
“There is a window for Congress to act on these changes in concert with the administrative reforms that FHFA is undertaking to free Fannie Mae and Freddie Mac from conservatorship,” Seiberg wrote in a note. “As such, we don’t see this as a wish list. These are changes that realistically could become law.”
As the FHFA is urging Congress to act on housing reform, the Treasury is also preparing its own plan for housing reform. That plan was requested by the White House earlier this year, and it will lay out the current administration’s road map to releasing Fannie and Freddie from government control.
“Taxpayers remain vulnerable and the time for comprehensive housing finance reform is now. It will be critical to set a path for ending the conservatorships of [Fannie Mae and Freddie Mac] in the near future while working with Congress and the Administration to transition to a reformed housing finance system,” Calabria wrote.
The companies, which backstop about $5 trillion of mortgage securities, got $191 billion in taxpayer money to make it through the financial crisis 11 years ago. They have returned to profitability and paid more in dividends to Treasury than they received in bailout funds.