Federal Housing Finance Agency Acting Director Edward J. DeMarco said that Congress needs to take action to significantly reduce, if not eliminate, the government’s continued support of the mortgage market and make it more palatable for private capital to enter the market, Reuters reported March 19.
DeMarco made his comments March 19 before the House Financial Services Committee.
While lawmakers on both sides of the aisle agree that government-sponsored enterprises Fannie Mae and Freddie Mac need to be wound down, Republicans and Democrats have thus far been unable to agree on how to make that happen.
“The U.S. housing finance system cannot really get going again until we remove this cloud of uncertainty and it will take legislation to do it,” DeMarco said, Reuters reported. “While FHFA is doing what it can to encourage private capital back into the marketplace, so long as there are two government-supported firms occupying this space, full private sector competition will be difficult, if not impossible, to achieve,” he said.
DeMarco said he doesn’t believe that the government must provide a critical backstop for the mortgage market and told the committee that it’s possible to rebuild a secondary mortgage market that is “deep, liquid, competitive and operates without an ongoing reliance on taxpayers or, at least, a greatly reduced reliance on taxpayers,” Reuters reported.
The FHFA already is making efforts to simplify the GSEs’ combined book of business. And after years of losses, both GSEs are once again profitable, which some worry may dampen Congress’ zeal for instituting major market reform, Reuters reported.