* Senate Banking Committee could approve bill on Tuesday
* Prospects for vote in full Senate uncertain
* Little chance of bill being enacted this year
By Margaret Chadbourn
WASHINGTON, April 29 The Senate Banking
Committee could approve as early as Tuesday a bill to wind down
taxpayer-owned mortgage financiers Fannie Mae and
Freddie Mac, but the measure faces an uncertain future
given competing and powerful political forces.
The legislation would replace the firms with an agency that
offers a government mortgage guarantee, but one that only kicks
in after private interests absorb big losses.
It aims to preserve the 30-year fixed rate loans that are at
the heart of the nation's mortgage system, while protecting the
taxpayers who bailed out Fannie Mae and Freddie Mac in 2008. The
companies are the two biggest sources of U.S. mortgage funds.
Committee Chairman Tim Johnson, a Democrat, and Senator Mike
Crapo, the panel's top Republican, are trying to thread a needle
to win support from Democrats worried about loan availability
and Republicans wary of government involvement in the market.
The panel meets at 10 a.m. (1400 GMT) to begin its
consideration of the bill.
Johnson and Crapo appear to have enough votes to push the
bill through the committee, but they want at least 16 "yes"
votes on the 22-member panel to pressure Senate Majority Leader
Harry Reid to let the measure come up on the Senate floor. Reid,
a Democrat, has voiced opposition in the past to legislation
that would get rid of Fannie Mae and Freddie Mac.
"This is complicated legislation," said David Stephens,
president of the Mortgage Bankers Association. "If you can get a
broad majority coming out of the committee, then there is
momentum for the bill to reach the Senate floor."
If the bill clears the panel and the Democrat-led Senate, it
would still need to be reconciled with any legislation the
Republican-controlled House of Representatives might produce.
The most likely House measure would scale back the government's
involvement much more sharply.
Many conservatives blame Fannie Mae and Freddie Mac for
fostering the loose lending that sparked the financial crisis,
and want to do away with government mortgage guarantees.
While a bill stands almost no chance of being enacted this
year, strong support for the Senate bill in the banking
committee could set a marker for future negotiations.
"This legislation represents a real and important step in
building a rock-solid system that brings responsibility,
opportunity, and stability back to the housing market," Housing
and Urban Development Department Secretary Shaun Donovan told
reporters on Monday.
Chartered by Congress to provide liquidity to the market,
Fannie Mae and Freddie Mac buy mortgages from lenders and
package them into securities for investors, which they offer
with a guarantee.
The companies ran into trouble after the housing bubble
burst, and government officials decided to bail them out given
their huge presence in the financial system. They absorbed
$187.5 billion in taxpayer funds but have since returned to
profitability and have now sent more money as dividends to the
Treasury for the government's controlling stake than they
received in aid.
Johnson and Crapo's draft bill is silent on how private
shareholders in the firms should be handled.
Some private shareholders have sued the government over
bailout terms that prevent the companies from buying back the
government's shares, and conservative groups want them to
receive a portion of profits if the two are liquidated.
Housing advocacy and civil rights groups worry the bill
would wipe out lending mandates that support affordable housing,
while small lenders fear the legislation would permit the
largest lenders to play multiple roles in the mortgage market.
The panel's leaders plan to introduce an amendment on
Tuesday aimed at addressing concerns among Democrats over the
potential for big lender dominance.
Concerns have also been raised over how well the mortgage
market would function during the five-year phase out of Fannie
Mae and Freddie Mac that the bill envisions.
"There will be no disruptions and, in fact, the new system
will be more efficient," said Donovan. "Taxpayers should never
again be on the hook for bailing out companies that guarantee
(Reporting by Margaret Chadbourn; Editing by Tim Ahmann and