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MNI POLICY: Mnuchin: Privatized Fannie, Freddie to Aid Market

Senators question whether plan will make mortgages more expensive
By Brooke Migdon
     WASHINGTON (MNI) - Senators questioned whether U.S. Treasury Secretary
Steven Mnuchin's proposal to overhaul the housing finance system could address
affordability concerns, hinting at a roadblock in the Trump administration's bid
to privatize Fannie Mae and Freddie Mac.
     Fannie and Freddie back half of the nation's mortgages and have an
obligation to provide low-income borrowers with approximately a quarter of the
home loans they back. Under the Treasury plan proposed last week, they would pay
an annual fee to the government in exchange for loans that are federally
guaranteed, reducing the risk of a bailout. Mnuchin told a Senate committee
Tuesday this guarantee would be extended to approved competitors to "level the
playing field" between Government-Sponsored Enterprises and private competitors.
     "The Trump plan will make mortgages more expensive and harder to get,"
Senator Sherrod Brown (D-Ohio) said Tuesday. "We shouldn't have to tell the
president we have an affordable housing crisis in this country. We all know it
and we all see it."
     Mnuchin said the GSEs would operate under a "utility model" with a
regulated rate of return and the Federal Housing Finance Agency should "maintain
regulation and oversight pricing of the guarantee." President Trump has not
"explicitly" approved the plan, Mnuchin said Tuesday, and it would also need
Congressional approval.
     Treasury's proposal said the plan to remove government backing of Federal
National Mortgage Association and Federal Home Loan Mortgage Corporation would
foster competition and settle "unfinished business" from the 2008 financial
crisis. Equitable loan and housing groups have criticized Treasury's proposed
reforms, stating that more expensive mortgages will disproportionately impact
minority borrowers and under-served communities.
     Mnuchin maintained the White House would practice caution, voicing support
for initiatives designed to help low-income home-buyers such as the 30-year
mortgage. "We are not going to jeopardize that for hard-working Americans," he
said.
     President Trump tasked Mnuchin with developing a plan for housing finance
reform earlier this year, stipulating the plan should establish regulatory
reform of the GSEs so as to minimize the "risks they pose to the financial
stability of the United States."
     Following the more than 3 million foreclosures filed during the 2008
financial crisis, Fannie Mae and Freddie Mac were taken over by the federal
government in a $200 billion bailout from taxpayers.
--MNI Washington Bureau; +1 202 371 2121; email: brooke.migdon@marketnews.com
[TOPICS: M$U$$$,MC$$$$,MGU$$$]

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