It appears GSE reform may actually be on the horizon—or at least discussed regularly in Washington—thanks to a new bill proposed by Congressman French Hill (R-Arkansas) recently.
The bill, called the HR 5505 GSE Review and Reform Act, would require the U.S Treasury Secretary to study the Federal Housing Finance Agency’s conservatorship of Fannie Mae and Freddie Mac annually, as well as the impact ending that conservatorship might have. The bill would also require the Treasury to present recommendations to Congress each year on how to progress GSE reform and move toward ending the conservatorship.
Fannie Mae and Freddie Mac have been under FHFA conservatorship for eight years, when the GSEs required a bailout after the housing market crashed in 2008. Though both Democrats and Republicans have pushed for GSE reform in recent years, Hill says little has been done by Congress to change the conservatorship or even consider a path toward reforming the current system.
“There has been no progress toward moving these federally dependent GSEs out of the conservatorship,” Hill said. “My bill would force Treasury to study this issue and present its recommendations to Congress at least once a year, creating engagement on the best path forward on housing finance reform to end taxpayer exposure and ensure access to mortgage credit for Americans.”
“There has been no progress toward moving these federally dependent GSEs out of the conservatorship.”
Rep. French Hill (R-Arkansas)
GSE reform has been hot in the news lately, with parties on both sides of the aisle making pushes in Congress. In mid-May, 12 right-center organizations wrote a letter that urged Congress to pass the Mulvaney Bill, a GSE reform bill sponsored by Rep. Mick Mulvaney (R-South Carolina) that would suspend the GSE’s obligation to fund the National Housing Trust Fund and Capital Magnet Fund until they were better capitalized.
Not long after that, a group of 32 Democratic House of Representatives members wrote to Treasury Secretary Jack Lew and FHFA Director Mel Watt to demand reassessment of the Preferred Stock Purchase Agreement (PSPA), which requires the GSEs to have a capital buffer of zero by Jan. 1 of next year. This request came on the back of Watt’s February speech at the Bipartisan Policy Center, when he proclaimed the GSEs’ capital buffer as one of the biggest risks of conservatorship to date.
Catch up on the latest news about GSE reform here.