Eliminating bailed-out mortgage giants Fannie Mae and Freddie Mac will be a priority for the Obama administration in the next Congress, Housing and Urban Development Secretary Julian Castro said Monday.
Castro said in an interview with Bloomberg TV that there was bipartisan support for “doing away with Fannie and Freddie as we’ve known them,” and that “housing finance reform certainly has been a priority and will continue to be a priority.”
Fannie and Freddie, which buy home loans from lenders and package them into securities to sell to investors with government guarantees, failed in the housing collapse in 2008 and have remained in the government’s custody since.
Efforts to terminate the two companies and replace them with a new system for housing finance have stalled in both the House and the Senate, but Castro appeared to brush off the legislative difficulties Monday.
“This could be, I believe, a good victory either in the lame-duck session or more realistically perhaps in the next term of Congress where there is bipartisan support for housing finance reform,” Castro said.
He expressed optimism for the passage of a bipartisan measure authored by Tim Johnson, D-S.D., and Mike Crapo, R-Idaho, the two top members of the Senate Finance Committee. Their bill would have phased out Fannie and Freddie and replaced them with a system of private finance for mortgage-backed securities backed by a government guarantee that would kick in after investors took the first losses.
But that bill failed to gain traction in the upper chamber after being passed at the committee level, as Democrats could not reach agreement about the role of the government in extending credit to middle- and lower-income families.
A measure passed by Republicans on the House Financial Services Committee in summer 2013 met a similar fate, lacking sufficient support among Republicans to clear the House.
GOP leaders have not listed legislation to end Fannie and Freddie among their priorities for the 114th Congress that starts in January.
As HUD secretary, Castro oversees the Federal Housing Administration, which backs loans for low-income housing. Fannie and Freddie fall under the supervision of the Federal Housing Finance Administration, an independent agency.
Castro is new to Washington, having been confirmed as HUD secretary in July. Previously, he was the mayor of San Antonio.
