* Idea is one of many competing plans for housing finance
* No consensus on if government should offer guarantee
* Final action not see until after 2012 elections
By Margaret Chadbourn
WASHINGTON, July 6 Mortgage finance firms
Fannie Mae FNMA.OB and Freddie Mac FMCC.OB would be folded
into a single government-run entity under legislation a
Republican lawmaker will introduce on Thursday.
Representative Gary Miller of California is set to unveil a
bill that would create a utility-like entity and phase out
government-controlled Fannie Mae and Freddie Mac.
The new financing company would purchase mortgages and
repackage them as government-backed securities. Unlike Fannie
and Freddie, it would not have shareholder investors. The
National Association of Homebuilders and the National
Association of Realtors are expected to endorse the proposal.
Miller is one of a handful of lawmakers on the House of
Representatives Financial Services Committee who have attempted
to push forward legislative proposals to revamp the U.S.
housing finance system.
Fannie Mae and Freddie Mac have operated under federal
conservatorship since they were seized amid soaring losses in
September 2008. Along with the Federal Housing Administration,
they now back more than 85 percent of all U.S. residential
mortgages in some way.
Republican lawmakers are keen to lessen the government's
involvement in the $10.6 trillion residential mortgage market,
but they have failed to coalesce around a single approach. Some
want to entirely shut down Fannie Mae and Freddie Mac, the two
largest providers of mortgage funding, while others want to
lessen their influence over time.
The bill from Miller, which is being co-sponsored by
Representative Carolyn McCarthy, a New York Democrat, adds to
the competing approaches on the table.
Earlier in May, Representatives Gary Peters, a Michigan
Democrat, and John Campbell, another California Republican,
introduced legislation that would create at least five private
companies to replace the two co-called government-sponsored
enterprises, or GSEs.
The dividing line among many lawmakers is whether or not to
provide a government backstop for mortgages and, if so, on what
terms to provide the guarantee. House Financial Services
Committee Chairman Spencer Bachus of Alabama is attempting to
forge a consensus among his Republican base.
However, any bill that is crafted by his committee and
moves forward to pass on the floor of the Republican-led House
would likely still be in jeopardy once it reaches the
Representative Scott Garrett, a New Jersey Republican who
heads a subcommittee that oversees Fannie Mae and Freddie Mac,
told Reuters the aim of the committee is to "end the
"I've asked anyone who is going to try and solve the GSE
problem -- and I'm open to ideas -- to make sure they don't
have a government backstop where the taxpayer can take a hit
for it," he said.
Garrett's subcommittee has approved separate bills to
reform and downsize the two firms. Most bills that have
advanced create a largely private mortgage-finance system.
"The longer they stay in conservatorship, the longer they
never leave," said Phillip Swagel, who served in the Treasury
Department under President George W. Bush. "The committee is
putting out a range of bills and making progress on different
fronts, but not confronting the key decision, which is the role
of the government in the system."
With the housing market still in the doldrums, any final
decisions on housing finance reform are expected to be put off
until after elections in 2012.
(Reporting by Margaret Chadbourn; Editing by Leslie Adler)