Senate Working Toward GSE Reform

June 17, 2013

Congress is preparing to address an issue that has loomed for five years: the fate of Fannie Mae and Freddie Mac. 

In the Senate, bipartisan legislation is in the works that would replace the two government-sponsored enterprises with a new "public guarantor" within five years.  The move is part of a broader plan where Washington no longer will backstop the country's $10 trillion mortgage market. 

Sens. Bob Corker (R-Tenn.) and Mark Warner (D-Va.) are leading the effort.  To date, two other Democrats—Sens. Jon Tester of Montana and Heidi Heitkamp of North Dakota—and two other Republicans—Sens. Mike Johanns of Nebraska and Dean Heller of Nevada—also are working on the bill, which has yet to be formally introduced. 

Serious talks about the future of the two GSEs faded quickly after President Obama issued a short "white paper" in the first quarter of 2011 that mapped out a trio of scenarios for their future. 

Today, almost all concerned concur that the status quo is untenable.  However, several centrist Republicans and a large number of Democrats insist that a federal role is necessary in order to preserve liquid markets for the 30-year, fixed-rate mortgage. Conservative Republicans want a private mortgage market with no new federal guarantees at all.

Source: "Fannie, Freddie Future Finds a Focus," Wall Street Journal (June 17, 2013)

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