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

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