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GSE reform bill wouldn’t set cap on Fannie, Freddie portfolios

Tighter capital provisions, market forces could rein in GSEs' borrowing power

The government shouldn't impose arbitrary caps on Fannie Mae and Freddie Mac's lending portfolios, but should distance itself from some of the government-sponsored mortgage repurchasers' debt obligations should they get into financial trouble. That's the view of a bipartisan bill introduced Friday to overhaul regulatory oversight of Fannie and Freddie and prevent a repeat of the management and accounting scandals of 2004. The bill, HR 1427, is expected to generate about $500 million a year for an affordable-housing fund to address concerns that the government-sponsored entities have neglected the mission they were chartered by Congress to perform. Backers of the bill from both parties hope it will resolve the long-running GSE reform debate. Although there has been general agreement about the need to create an independent oversight agency with powers similar to those of a bank regulator to oversee Fannie and Freddie, Democrats have opposed a Bush administration proposal to set limits ...