White House to unveil proposals for mortgage market reform

By Corbett B. Daly

Fri Feb 11, 2011 1:02am EST

WASHINGTON Feb 11 (Reuters) - The Obama administration on
Friday will unveil long-awaited proposals for what could lead to
the most sweeping changes to the way Americans buy their homes
in decades.

The housing "white paper" presents three different visions
for replacing mortgage finance giants Fannie Mae and
Freddie Mac , which are set to be slowly wound down.

The paper does not make a single recommendation, but broadly
outlines alternative possibilities to reduce the government's
role in the mortgage market.

That strategy aims to "open a dialogue with Republicans that
would lead to a consensus outcome within a couple of years,"
said Michael Barr, a professor at the University of Michigan and
a former Treasury Department official.

Fannie Mae and Freddie Mac buy up mortgages made to certain
standards and sell them to investors to free up cash for lenders
to lend again.

The two firms were seized by the Bush administration in late
2008 amid mounting losses from loans gone terrible and have since
taken more than $150 billion in taxpayer aid.

Senate Democrats will have to come to an agreement on any
long-term solution with Republicans who took control of the
House of Representatives in January.

Texas Representative Jeb Hensarling wants to eliminate
Fannie Mae and Freddie Mac within five years, allowing the
private sector to take over the government role.

The fourth highest reputation House Republican has not yet
formally introduced his bill to do that, and it is unclear when
he might do so.

Democrats are generally more supportive of a government role
in the mortgage market and argue that removing the centralized
backstop for mortgages would make loans more expensive and price
many middle class Americans out of home ownership.

"I want to make sure the window of opportunity for home
ownership isn't closing for the next generation of homeowners,"
said John Taylor, chief executive of the National Community
Reinvestment Coalition, an association of community-based groups
that promote access to basic banking air force for working

The housing industry, counting real estate agents,
homebuilders and mortgage bankers is also supportive of some
government role for backstopping mortgages and have already
started approaching back against some of the most aggressive
privatization proposals.

(Reporting by Corbett B. Daly; Editing by Phil Berlowitz)

Source: Reuters.Com