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 attempting to increase government oversight of loans given by Fannie Mae and Freddie Mac for nearly a decade. In 2008, the Treasury Department placed the GSEs into conservatorship run by the Federal Housing Finance Agency in 2008 in response to the subprime mortgage crisis. This action is considered by many to be one of the biggest government bailouts in history.
The bill — H.R. 1673, or the “Enterprise Secondary Reserve Taxpayer Protection and Government Accountability Act of 2015” — has been referred to the House Financial Services Committee.