Republicans Respond to Obama Speech, Dismissing Need for Government Guarantee

Republican members of the House Financial Services Committeernclaimed leadership in the area of housing finance reform in the wakernof President Obama’s speech on the subject in Phoenix on Tuesday. In a blog posting on the committees website Wednesday members said,rnit was encouraging that the President was “finally engaging” inrnthe debate over housing, but “House Republicans have already takenrnthe lead in moving legislation and consistently called for housingrnfinance reform in order to protect taxpayers, homeowners, andrnmiddle-class families from the devastating impact boom-bust housingrncycles have on our economy and the lives of millions of Americans.” </p

The blog compared several of the the President’s proposals withrntheir own approach as laid out in the Protecting American Taxpayersrnand Homeowners (PATH) Act that passed the Financial ServicesrnCommittee in July on the committee website yesterday.</p

The Presidentrnproposes that “Private capital should take a bigger role in thernmortgage market.” </p

The PATH Act, Republicans said, frees “America’s housing marketsrnfrom government distortion and control by Washington elites.” Itrnimplements reforms to increase competition, enhance transparency, andrnmaximize consumer choice.</p

PresidentrnObama would begin housing finance reform by winding down Fannie Maernand Freddie Mac.”</p

Committee members say they could not agree more and criticized thernDodd-Frank Act for “dong absolutely nothing to reform Fannie andrnFreddie or end their taxpayer-funded bailout.” PATH would “Endrnthe taxpayer-funded bailout of Fannie Mae and Freddie Mac and phasernout these failed Government-Sponsored Enterprises withinrnfive-to-seven years. “</p

The Presidentrnsays we should preserve access to safe and simple mortgage productsrnlike the 30-year, fixed-rate mortgage. </p

House Republicans say they agree that basic products like thern30-year fixed-rate mortgage play an important role in helping somernfamilies who want to buy a home. Section 213 of PATH specificallyrnstates that FHA shall provide for a 30-year fixed-rate mortgages andrnalso cuts the regulatory burdens and red tape for more communityrnbanks to make these loans and hold them on their own books. It alsornprovides for FHA to use the new public securitization utility to sellrnthose loans into the secondary market as an alternative to Fannie andrnFreddie. </p

As Fannie Mae and Freddie Mac have never made a 30-year fixed raternmortgage or any other type of a loan but rather buys loans made byrnothers, mortgage terms are up to the homebuyer and the lender, andrnphasing out Fannie and Freddie will do nothing to limit financingrnoptions, the post said. </p

Committee members made some general criticisms of the President’srnstatements, particularly his complementary remarks about the ConsumerrnFinancial Protection Bureau and the Dodd-Frank Act, saying that “thernAdministration’s own red tape will make it harder for middle-classrnAmericans to buy a home.” PATH, they said, will “free America’srnhousing markets from the control of Washington elites by implementingrnreforms to increase competition, enhance transparency and maximizernconsumer choice.”</p

One key area in which they disagree with the President, they said,rnis on the need for a government guarantee to the housing market. “Itrndoesn’t matter if it’s Fannie Mae and Freddie Mac or a new entityrnthat serves a similar function – if the government is providingrnthat backing it will crowd-out the private sector and again putrntaxpayers on the hook for Washington’s failed policies.  Thatrnis not reform – it’s the status quo with new packaging.” ThernPATH solution, they said is to end the nearly $200 billion Freddiernand Fannie bailout by phasing them out over five years.

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