WASHINGTON May 18 The regulator of
government-controlled mortgage finance firms Fannie Mae
and Freddie Mac said on Sunday he would not
oppose them having a smaller presence in the market but private
capital had to be ready to take over first.
Federal Housing Finance Agency Director Mel Watt said the
two companies, which own or guarantee about 60 percent of all
U.S. home loans, needed to remain in the housing finance market
to make sure it was liquid and resilient.
Watt said last week, in his first public speech since taking
office, that he did not want to shrink Fannie and Freddie's
footprint, marking a sharp departure from his predecessor.
"It's not that I'm opposed to it and we will certainly allow
it to happen," he told C-SPAN's "Newsmakers" program, when asked
about the prospect of shrinking the lenders' activities.
"But if the private sector is not ready to step into the
space, and you shrink what Fannie and Freddie are doing, you do
damage to housing finance in this country and that does damage
to the economy and that does damage to the possibility of
affordable housing and home ownership."
Watt said on May 13 he would hold off on a proposed
reduction in the size of loans the firms can buy and scrap plans
to reduce the financing they provide for apartment building
He said on Sunday he had not discussed his policy plans with
the White House before the speech.
Fannie Mae and Freddie Mac have returned bumper profits
recently, driven mainly by income from legal settlements, but
Watt said these would not continue forever.
"The record level of profits that Fannie and Freddie have
had over the last couple of years certainly are not sustainable
because they result in large part from large settlements of
litigation," Watt said.
Under their bailout terms, profits are paid to the Treasury
as dividends on the controlling stake the government took when
it seized the mortgage lenders at the height of the financial
crisis in 2008.
They will have returned $213.1 billion to taxpayers by the
end of June, more than the aid they received.
Watt said the agencies, which the White House and lawmakers
from both parties have said they eventually want to wind down,
were not constrained by the arrangement with the administration.
He said he was willing to talk about changing the rules
stemming from the bailout but was happy with taxpayer backing.
"I don't think that's a bottomless pit or a bucket that can
never be drained ... but right now it's not creating problems
for them to operate," he said.
(Reporting by Krista Hughes and Tim Ahmann; Editing by Jim
Loney and Sophie Hares)