House Republicans are lining up a second round of bills designed to remake troubled mortgage titans Fannie Mae and Freddie Mac, as they continue a broader push to overhaul the nation's housing system by winding down the two government-sponsored enterprises (GSEs).
GOP members of the House Financial Services Committee unveiled a package of seven bills Friday. Taken together, the legislation would set new limits on what the GSEs can do, as they begin chipping away at them. It also would set boundaries on how the federal government could address the nation's housing needs going forward.
"Fannie and Freddie's days are numbered," said Rep. Scott Garrett (R-N.J.), who chairs the capital markets and GSE subcommittee that will steer the legislation. "It's not a matter of it, but when -- the quicker we begin the process of dismantling them the better off we'll be."
House Republicans are optimistic about their housing efforts, noting that they enjoy a rare common ground with the White House on the issue. In a report released in February, the administration laid out three options for how to remake the housing market. While it differed from Republicans in still calling for some government role, it also advocated a significantly reduced public role, and the ultimate winding down of Fannie and Freddie.
"They are on the same page as we are," Garrett told reporters Friday. He added that he and other Republicans met with Treasury Secretary Timothy Geithner and Housing and Urban Development Secretary Shaun Donovan to discuss housing issues this week.
For starters, Republicans want to set a hard cap on the amount of money the federal government can dole out to keep the GSEs afloat. Setting limits on the amount of federal assistance they can receive will not only protect taxpayers, but also help push along the transition of the nation's housing finance system, the GOP argues. Another bill would require Fannie and Freddie to begin selling off non-critical assets, like any patents or data they have in their possession.
The exact specifics of how those measures would work are not yet known, but will be hammered out when Garrett's panel holds a hearing on the bills later in May. A markup of the bills is likely to come at his subcommittee in June.
"There are a myriad of issues that need to be considered and reconciled so that we don't have a situation of the law of unintended consequences," he said.
Another bill would dictate that if Fannie and Freddie are ultimately put into federal receivership and wound down, another entity with a similar structure -- government charter and private stockholders -- is not created to take their place.
Republicans also want to ensure that taxpayers continue receiving 10 percent dividend payments from the GSEs, introducing a bill that would prevent the Treasury Department from lowering that amount.
And another would abolish the Affordable Housing Trust Fund, which Republicans paint as "nothing more than a slush fund for special interest housing groups."
Another bill would subject Fannie and Freddie to the Freedom of Information Act (FOIA). The GSEs are currently exempted from the law, but Republicans argue that since they have been brought under full control of the U.S. government, they should have to meet the same disclosure standards as other government agencies.
The GOP also is setting its sights on hefty legal fees paid out by Fannie and Freddie to defend former executives. The GSEs have spent over $160 million to defend themselves and former executives in the fallout from the financial crisis. Under another bill, the Federal Housing Finance Agency (FHFA), which regulates Fannie and Freddie, could put limits on the advancement of legal fees for executives involved in cases of "moral turpitude or fraud."
In March, House Republicans rolled out their first set of eight bills targeting Fannie and Freddie. Those measures would curb executive pay at the GSEs, increase the guarantee fees they charge mortgage originators, speed up the wind down of their portfolios and repeal their affordable housing goals. The bills were approved by Garrett's subcommittee, and now are waiting full committee consideration.
Republicans also are juggling another, broader bill introduced by Rep. Jeb Hensarling (R-Texas). That measure, similar to one he introduced in the last Congress, sets an aggressive timetable for the winding down of the GSEs. It would remove them from government control in two years, and turn them into wholly private entities or eliminate them altogether within five.