Treasury: Have Your Say on Future of Fannie, Freddie

Fannie Mae, Freddie MacU.S. officials are seeking your opinion on the future of the mortgage financing system’s Fannie Mae and Freddie Mac, and the role of the federal government in housing policy.
The Obama Administration has been under pressure to speed up overhaul plans for troubled Fannie and Freddie, while Republicans have called for the phasing out of the two entities in favor of fully privatizing mortgage funding.
The U.S. Treasury released a series of questions to get feedback from a range of interested parties, including “market participants, industry groups, academic experts, and consumer and community organizations.”
Anyone will be able to submit written responses to the questions to be published in the Federal Register online at www.regulations.gov.  U.S. officials also will hold a series of public forums across the country on housing finance reform.
“A well-functioning housing finance system is critical to the long term stability of the housing market,” said Treasury Secretary Timothy Geithner. “Hearing from a wide variety of perspectives as we embark on this process is an important part of establishing a more stable and sound housing finance system for the American people.”
Fannie and Freddie are government-sponsored enterprises, but publicly-traded companies with a Congressional mandate to help Americans into affordable homeownership.
But both Fannie and Freddie nearly collapsed from the weight of overwhelming losses fueled by their acquisition of private-label securities backed by subprime mortgage and other high-risk paper. The government seized the two entities in late 2008. They have received bailouts totaling about $127 billion, and have an open credit facility for the next three years.
House Republicans have called for the phasing out of Fannie and Freddie over the next four years, resulting in private capital as the primary source of mortgage funding. The Housing finance system reform is not included in the current financial oversight reform bill under debate in the Senate.
Here are the questions provided by Treasury for public input:
1.      How should federal housing finance objectives be prioritized in the context of the broader objectives of housing policy?
Commentary could address: policy for sustainable homeownership; rental policy; balancing rental and ownership; how to account for regional differences; and affordability goals.
2.      What role should the federal government play in supporting a stable, well-functioning housing finance system and what risks, if any, should the federal government bear in meeting its housing finance objectives?   
Commentary could address: level of government involvement and type of support provided; role of government agencies; role of private vs. public capital; role of any explicit government guarantees; role of direct subsidies and other fiscal support and mechanisms to convey such support; monitoring and management of risks including how to balance the retention and distribution of risk; incentives to encourage appropriate alignment of risk bearing in the private sector; mechanisms for dealing with episodes of market stress; and how to promote market discipline.
3.      Should the government approach differ across different segments of the market, and if so, how?   
Commentary could address: differentiation of approach based on mortgage size or other characteristics; rationale for integration or separation of functions related to the single-family and multi-family market; whether there should be an emphasis on supporting the production of subsidized multifamily housing; differentiation in mechanism to convey subsidies, if any.
4.      How should the current organization of the housing finance system be improved?
Commentary could address: what aspects should be preserved, changed, eliminated or added; regulatory considerations; optimal general organizational design and market structure; capital market functions; sources of funding; mortgage origination, distribution and servicing; the role of the existing government-sponsored enterprises; and the challenges of transitioning from the current system to a desired future system.
5.      How should the housing finance system support sound market practices?
Commentary could address underwriting standards; how best to balance risk and access; and extent to which housing finance systems that reference certain standards and mortgage products contribute to this objective.
6.      What is the best way for the housing finance system to help ensure consumers are protected from unfair, abusive or deceptive practices?
Commentary could address: level of consumer protections and limitation; supervising agencies; specific restrictions; and role of consumer education
7.      Do housing finance systems in other countries offer insights that can help inform US reform choices?

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