Senate Republicans on Wednesday aired their fears that Fannie Mae and Freddie Mac, which have been in the government’s custody for nearly a decade, are expanding their role in housing markets rather than reducing it.
“The overall trends I am seeing toward greater taxpayer risk and greater government presence in the mortgage market are concerning,” said Senate Banking Committee chairman Mike Crapo, R-Idaho.
Crapo and other Republicans addressed their worries directly to the regulator responsible for Fannie and Freddie, Federal Housing Finance Agency director Mel Watt, as he testified before the committee.
They flagged Watt’s decision to allow the two bailed-out companies to back home loans with very low down payments, begin pilot programs allowing for loans with no down payments, and back mortgages for people with high debt-to-income ratios.
Fannie and Freddie back about $5 trillion in mortgage-backed securities. They buy mortgages from banks and other lenders, package them into the securities for sale to investors, and offer a guarantee if they go bad.
“It appears that instead of trying to decrease the footprint over time, over the last fives years we’re beginning to, especially in the last couple of years, expand the mission,” said Sen. Bob Corker, R-Tenn.
Watt, an Obama appointee and former Democratic congressman, is nearing five years in office. He has undone some of the policies put in place by his predecessor to gradually reduce the market presence of Fannie and Freddie.
On Wednesday, he defended his management of the firms as necessary to carry out their affordable housing mission.
“If we don’t do that, I don’t know who does it in this country,” he said of the efforts questioned by Corker.
Watt’s term expires early next year, and some conservatives have called on Trump to appoint a replacement who would gradually shrink their business and then put them on a path to practical elimination.
