Wednesday, May 23, 2007

Oversight of Fannie Mae and Freddie Mac approved

On Tuesday, May 22, the House of Representatives passed a bill that tightens federal oversight over mortgage giants Fannie Mae and Freddie Mac. The bill would create a new regulator to oversee the Government-Sponsored Enterprises.

In House action last Thursday, the bill was amended and the regulator’s authority was trimmed. The Bush administration, which insisted that the regulator have control over the companies’ mortgage portfolios, may not support the amended legislation. This influences the bill’s chances for congressional passage.

For the first five years, the companies will have to set aside some $500 million of profits annually into an affordable-housing fund. The fund will be used to provide housing for victims of Hurricanes Katrina and Rita in the first year, and for affordable housing construction later. Republicans, who opposed the bill, say that the housing fund will actually be paid for by middle-class homeowners, because it will require a “mortgage tax” to be paid on every loan Fannie Mae or Freddie Mac finances.

Earlier attempts to enact such legislation have failed.

No comments: