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Officials of the Obama administration recently rejected investors' calls to reform Fannie Mae and Freddie Mac to end the seven-year conservatorship between the two GSEs.
Over the last year, many investment firms and affordable housing advocates have pressed the Obama administration to reform the GSEs.
Top adviser to President Barack Obama on housing matters Michael Stegman stated Monday that the administration will be keeping Fannie Mae and Freddie Mac under government control, according to an article on Bloomberg.
The GSEs have been under FHFA conservatorship since September 2008, at which time they needed a combined bailout of $187.5 billion from taxpayers in order to stay afloat and "preserve and conserve their assets and property and restore them to a sound financial condition so they can continue to fulfill their statutory mission of promoting liquidity and efficiency in the nation's housing finance markets," according to FHFA's website.
Stegman explained that no one should be "misled by the increasingly noisy chorus of the advocates of recap and release."
Earlier this month, the Bipartisan Policy Center hosted a keynote address and panel discussion titled "Housing Fiance Reform:Opportunities and Obstacles of Risk Sharing."
Sen. Bob Coker cautioned that GSE reform could "be a while and won’t happen in the next year and four months. Some of our wingers are migrating over to this third amendment thing because it makes it easy not to do anything.”
The overall consensus of the panelists was that moving forward, the goal should be to strengthen the housing market, build more capital, and enhance credit risk transfers.
However, GSE reform could be a lengthy and a difficult issue to overcome as "legislation on this topic remains elusive, the new word for ‘not happening,’” the introductory speaker said.
In May of this year, Fitch Ratings affirmed that while Fannie Mae and Freddie Mac maintained a "Stable Rating Outlook" in April due to direct financial support from the U.S. government, the ratings company said it expected the controversial FHFA's conservatorship of the two Enterprises would continue indefinitely.
"Despite significant legislative efforts over reform of the housing market during the past year, the government-sponsored enterprises (GSEs) remain in conservatorship without a clear exit path," Fitch said in its report. "The Federal Housing Finance Agency (FHFA) has signaled that it will not interfere with Congress with respect to housing market reform."
Click here to read the full Bloomberg article.
