Rep. Scott Garrett (R-NJ), Chairman of the Financial Services Subcommittee on Capital Markets and Government-Sponsored Enterprises, delivered the following opening statement today at a field hearing in Chicago to examine the Federal Housing Finance Agency's (FHFA) Real Estate Owned (REO) Pilot Program:
"I welcome our guests and esteemed Congressional colleagues on a beautiful Monday morning in the Windy City. I appreciate our witnesses for traveling so far to be here today.
"We are several months away from the 4th anniversary of the two Government Sponsored Enterprises, Fannie Mae and Freddie Mac, being put into conservatorship by the federal government. The price tag for this ongoing bailout has reached $180 billion and is climbing higher. Currently, the American taxpayer is backing over 90% of the nation's mortgage market. This is completely unsustainable. It is critical that the taxpayer's exposure be reduced and the assets of Fannie and Freddie begun to be wound down.
"The purpose of this field hearing is to further examine the Federal Housing Finance Agency's Real Estate Owned or REO Pilot Program that began last year. This pilot program is designed to determine the best ways in which to do larger, bulk sales of the GSE's REO portfolio to private investors who will then manage and service the properties and rent them out to local residents.
"This is a very complicated procedure and there are many questions that need to be thought through. For instance: What is the level of interest of investors in this new asset class? What types of standards should investors meet to become an eligible buyer? How do you maximize the value of the property and receive market value when selling in bulk? How will the physical properties be managed? What role will community and nonprofit groups play? How can private institutions that have REO portfolios use this as a potential model?
"I look forward to learning answers to these and many more questions today. I believe the REO pilot program has promise but also contains potential additional risk. It is critical that we begin to reduce some of the shadow inventory that currently exists but we must do so in a way that maximizes value for the American taxpayers and doesn't subject them to additional risk.
"I am hopeful that an efficient and cost-effective strategy for disposition of the REO inventory for Fannie and Freddie can decrease risk for the entities, maximize value for the taxpayer and help the housing markets in the hardest hit areas.
"I want to thank Illinois Congressman Bob Dold who is an active and hard-working member of this Subcommittee for helping organize this hearing today. He is very concerned about the current state of housing in this area and is pursuing all potential options to improve the market. Unfortunately, Congressman Dold had a death in his family late last week so he couldn't be here today but I know he will continue to be front and center on these important issues.
"And finally, I want to state for the formal record, as I have done several times, that I believe Director Ed DeMarco and his team at FHFA are doing an outstanding job, especially given the immense political pressure they are under by some to open the Fannie and Freddie cookie jar. They are doing a terrific job protecting taxpayers from additional losses and should be commended."