June 30, 2011 / 8:07 PM / 6 years ago

US House Republicans want bond fund to bar Fannie, Freddie

WASHINGTON, June 30 (Reuters) - A group of six U.S. House Republicans told the Obama administration they are concerned Fannie Mae FNMA.OB and Freddie Mac <FMCC.OB could tap into a new federal loan bond-guarantee program.

The Treasury Department is seeking input on a $2 billion bond guarantee program established by a small business bill enacted in 2010, which is aimed at providing assistance to those investing in community development. The government is soliciting public comment on the program’s design, who can participate and how the funds can be used.

The Treasury Department will guarantee the notes or bonds issued to support the Community Development Financial Institutions that make investments for eligible purposes.

The administration is considering how to best structure the program for lenders that are qualified to access the source of long-term capital through the Community Development Financial Institutions Fund.

As it stands now, the program is open to lenders, including Fannie Mae and Freddie Mac.

But six House Republicans, including Representative Scott Garrett, a New Jersey Republican who chairs the subcommittee that oversees Fannie and Freddie, said the government-sponsored enterprises should not have access to the CDFI Fund.

They expressed their concerns in a letter to Treasury Secretary Timothy Geithner and Edward DeMarco, acting director of the Federal Housing Finance Agency, the regulator of the two government-controlled mortgage finance firms.

“It would be inappropriate to allow Fannie Mae or Freddie Mac to expand their operations or deviate from their core activities,” the lawmakers said in the letter, which was dated June 29.

The lawmakers strongly urged limiting the mortgage giants, which were both placed into government hands in September 2008, from expanding their lines of business since it would “contradict the goals of the GSEs’ conservatorship.” (Reporting by Margaret Chadbourn; Editing by Jan Paschal)

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