Maxine Waters: ‘We are a long way’ from Fannie, Freddie reform

WASHINGTON (MarketWatch) — It’s been almost seven years since mortgage-finance giants Fannie Mae and Freddie Mac were placed into conservatorship, and U.S. lawmakers have yet to pin down how to reinforce the housing market’s infrastructure, without disrupting sales or putting taxpayers at risk.

Discussions over housing-market reform are difficult — the topic is complex and there are fundamental disagreements over the role for government.

“We have not been able to figure it out. It’s just not easy,” California Rep. Maxine Waters, the top Democrat on the U.S. House Financial Services Committee, told MarketWatch. “We are a long way from making any decisions about reform of Fannie and Freddie.”

Proposals to restructure the housing market touch close to the heart of families across the country. Fannie FNMA, +2.76%  and Freddie FMCC, +2.42%  together back about half of new home mortgages, and no lawmaker wants to be known for getting housing reform wrong.

Meanwhile, some may see inaction as tempting. Because of a bailout agreement with the federal government, Fannie and Freddie have now sent the U.S. Treasury a total of about $231 billion, about $43 billion more than the firms received in aid. This arrangement has led to shareholder suits, which claim that the government is unfairly taking private capital.

MarketWatch spoke with Waters about the housing market, the role of Fannie and Freddie and the companies’ regulator, the Federal Housing Finance Agency. This transcript has been edited for clarity and length.

MarketWatch: The U.S. economy and the housing market seem to be recovering without replacing Fannie and Freddie. Since Congress is divided, what’s wrong with keeping the status quo?

Waters: The discussion continues about Fannie and Freddie. There are those who say let’s keep the status quo. And, of course, there are those who say that there have to be some reforms in Fannie and Freddie.

Of course, Fannie and Freddie look pretty good. Not only have they been performing well, but they have paid back all of the money to the Treasury and they continue to earn money. So that makes them look very, very good.

I believe that it is important to have something in place that will ensure that we have a secondary market, something in place to ensure that we are able to provide homeownership opportunities for the average person who is working every day and who can afford to pay a mortgage, people who have demonstrated that they pay their rent on time, they pay their utilities on time.

We cannot leave them to not be eligible for support from something like Fannie and Freddie. So I’m not supportive of those who say the private market can do all of this.

MarketWatch: So you are not ruling out, for instance, keeping Fannie and Freddie in something close to their current form?


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