WASHINGTON (Reuters) - Republican lawmakers on Friday proposed legislation to keep in place the dividends mortgage finance giants Fannie Mae and Freddie Mac pay the government for taxpayer support, while capping the amount of aid they can get.
The proposals are part of Republican efforts to privatize the residential mortgage market by shutting down the two government-controlled firms that dominate it. Fannie and Freddie, together with the Federal Housing Administration, finance almost 90 percent of U.S. home loans.
“Fannie and Freddie’s days are numbered,” said Scott Garrett, who heads the subcommittee in the U.S. House of Representatives that oversees the two firms.
Garrett is guiding a strategy of pushing narrow bits of legislation through Congress in an effort to gain as much bipartisan support as he can.
Fannie Mae and Freddie Mach, which were taken over by the government at the height of the financial crisis in September 2008 as losses on mortgage ballooned, have received about $164 billion in taxpayer aid.
Both Democrats and Republicans agree that the U.S. system of mortgage finance, the epicenter of the financial crisis, needs to be overhauled.
Republicans, however, tend to want to remove most government involvement, while many Democrats favor some kind of continued government role to support homeownership.
“The quicker we begin the process of dismantling them the better off we’ll be,” Garrett said of Fannie Mae and Freddie Mac.
Efforts to retool the two companies comes at a tricky time, with the housing market still in the doldrums.
Garrett’s subcommittee has already approved eight bills to reduce the influence of Fannie Mae and Freddie Mac. Among other steps, those measures called for an accelerated wind-down of their portfolios and a limit on the new debt they can issue.
Another round of bills will follow, Garrett said. He said he hopes the panel will vote on the measures in June.
Another influential lawmaker, No. 4 House Republican Jeb Hensarling, has introduced separate legislation to directly wind down Fannie Mae and Freddie Mac within five years. The head of the House Financial Services Committee, Spencer Bachus, has said he would hold a vote on that measure as well.
Fannie Mae and Freddie Mac do not lend directly to borrowers but package loans as securities and sell them to investors, a system that is designed to free up banks to make new loans and help promote home ownership. For years they operated as private companies with implicit government backing.
One of the proposals Garrett announced on Friday would set a dollar cap on taxpayer support. He said lawmakers have yet to work out how much that cap would be.
Another bill would prevent the Treasury Department from lowering the 10 percent dividend on preferred shares both companies are required to pay the government.
“This will ensure that the two entities continue to repay their debt to the taxpayers and that their ongoing bailout moves toward conclusion,” Garrett’s office said in a statement.
Another measure would require the companies to sell off certain assets, including some patents and data. Such property could be extremely valuable to firms doing business in mortgage finance.
While many of the bills are expected to be approved by the Republican-led House of Representatives, their fate is uncertain in the Senate, which is ruled by Democrats.
Reporting by Mark Felsenthal; Editing by Neil Stempleman and Leslie Adler