Mortgage

Proposed bill would place Fannie, Freddie funds in escrow

Legislation would establish a secondary reserve fund for government-sponsored enterprises

Aiming to protect taxpayers against loss in the event of a housing market downturn, Rep. Marsha Blackburn, R-Tenn., yesterday introduced legislation that would establish a secondary reserve fund for government-sponsored enterprises Fannie Mae and Freddie Mac. If passed, revenues from Fannie Mae and Freddie Mac would be placed in escrow until Congress can reach a resolution on GSE reform. Consumers who seek to purchase mortgages on the secondary market are most likely to be affected, should the bill pass. When Congress established the GSEs, it intended to increase the flow of credit to some sectors of the economy, make them more efficient and transparent, and reduce investor risk. Together, Fannie Mae and Freddie Mac own or guarantee more than half of the $10 trillion U.S. mortgage market. Citing concerns that the GSEs hinder some lenders’ access to the secondary market and the instability of the capital markets in the event of a market failure, lawmakers have been attemptin...