Earlier this year, the House Subcommittee on Capital Markets and Government Sponsored Enterprises passed eight bills that significantly reform Fannie Mae and Freddie Mac.
Though there has been lots of talk, this is the first time since the 2008 bailout that concrete steps have been taken to change the way Fannie and Freddie do business.
The bills address everything from the size of Fannie and Freddie's portfolios, to compensation for executives and the overall mission of the entities.
H.
R.
1226, called the GSE Mission Improvement Act, makes significant changes to the scope within which Fannie and Freddie can operate, and what their goals should be.
The bill strikes Sections 1331 to 1336 from the original Federal Housing Enterprises Financial Safety and Soundness Act, effectively repealing Fannie and Freddie's affordable housing goals.
The elimination of affordable housing-related goals is intended to prevent both Fannie Mae and Freddie Mac from generating mortgages for people whose income or credit rating put them at greater risk for default, as they have previously done.
Other bills passed by the House Subcommittee require greater transparency, prohibit either entity from engaging in new business until bailout money has been repaid, and require approval from the Treasury Department if Fannie or Freddie want to take on any additional debt.
They are: H.
R.
31; and H.
R.
1221-1227.
H.
R.
31 gives the Federal Housing Finance Authority Inspector General authority to directly hire and fire employees of Fannie Mae and Freddie Mac.
In addition, it directs the IG to submit quarterly reports regarding Fannie Mae and Freddie Mac activities and overall financial conditions for as long as the entities are in conservatorship.
H.
R.
1221 effectively eliminates any monetary compensation, other than the actual salary, paid to the executives of Fannie Mae and Freddie Mac.
The remaining bills each address a different issue that is considered a contributing factor to the financial crisis and the current financial troubles and Fannie and Freddie.
If the bills are signed into law, both entities will be required to charge a "guarantee fee" for each loan guarantee they make for residential properties.
They will be forbidden from giving special consideration to asset-backed securities based on loans they originated, and their debt holdings will be limited to $700 billion in mortgage assets, decreasing incrementally to no more that $250 billion in five years.
In addition, both lending entities will be required to obtain approval from the Secretary of the Treasury before making any additional loan obligations, and they will be prohibited from creating any new mortgage products as long as they are in conservatorship or receivership.
Now that the Subcommittee has approved all eight bills, they must next be approved by the full committee, and then voted on by the full House.
There is no indication when any of those steps will take place.
Though there has been lots of talk, this is the first time since the 2008 bailout that concrete steps have been taken to change the way Fannie and Freddie do business.
The bills address everything from the size of Fannie and Freddie's portfolios, to compensation for executives and the overall mission of the entities.
H.
R.
1226, called the GSE Mission Improvement Act, makes significant changes to the scope within which Fannie and Freddie can operate, and what their goals should be.
The bill strikes Sections 1331 to 1336 from the original Federal Housing Enterprises Financial Safety and Soundness Act, effectively repealing Fannie and Freddie's affordable housing goals.
The elimination of affordable housing-related goals is intended to prevent both Fannie Mae and Freddie Mac from generating mortgages for people whose income or credit rating put them at greater risk for default, as they have previously done.
Other bills passed by the House Subcommittee require greater transparency, prohibit either entity from engaging in new business until bailout money has been repaid, and require approval from the Treasury Department if Fannie or Freddie want to take on any additional debt.
They are: H.
R.
31; and H.
R.
1221-1227.
H.
R.
31 gives the Federal Housing Finance Authority Inspector General authority to directly hire and fire employees of Fannie Mae and Freddie Mac.
In addition, it directs the IG to submit quarterly reports regarding Fannie Mae and Freddie Mac activities and overall financial conditions for as long as the entities are in conservatorship.
H.
R.
1221 effectively eliminates any monetary compensation, other than the actual salary, paid to the executives of Fannie Mae and Freddie Mac.
The remaining bills each address a different issue that is considered a contributing factor to the financial crisis and the current financial troubles and Fannie and Freddie.
If the bills are signed into law, both entities will be required to charge a "guarantee fee" for each loan guarantee they make for residential properties.
They will be forbidden from giving special consideration to asset-backed securities based on loans they originated, and their debt holdings will be limited to $700 billion in mortgage assets, decreasing incrementally to no more that $250 billion in five years.
In addition, both lending entities will be required to obtain approval from the Secretary of the Treasury before making any additional loan obligations, and they will be prohibited from creating any new mortgage products as long as they are in conservatorship or receivership.
Now that the Subcommittee has approved all eight bills, they must next be approved by the full committee, and then voted on by the full House.
There is no indication when any of those steps will take place.
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