Senator Bob Corker on Tuesday deplored the government-sponsored enterprise Freddie Mac reporting a $475 million loss in the third quarter and the Federal Housing Finance Agency’s (FHFA) efforts to de-risk these entities:
“Today’s announcement by Freddie Mac is yet another reminder that our government-sponsored mortgage enterprises continue to put American taxpayers at risk.
While Congress must act to protect taxpayers by reforming our nation’s housing finance system, I commend Director Watt and the FHFA for taking steps in the meantime to de-risk these behemoth duopolies and hope the agency will accelerate the process."
Under the direction of FHFA, both enterprises continue to reduce their retained portfolios and transfer credit risk away from the taxpayers to the private sector. To date, the enterprises have transferred credit risk on loans with over $667 billion of unpaid principal balance.
Legislation first introduced by Senator Corker and Senator Mark Warner (D-Va.) in June 2013, the Housing Finance Reform and Taxpayer Protection Act (S.1217), passed the Senate Banking Committee in May 2014 by a vote of 13 to 9. The bill would strengthen America’s housing finance system by replacing government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac with a privately capitalized system that preserves market liquidity and protects taxpayers from future economic downturns.
During the 2008 financial crisis, Fannie Mae and Freddie Mac were taken into government conservatorship and given a $188 billion capital injection from taxpayers to stay afloat. As a result, the private market almost completely disappeared, and nearly every loan made in America today comes with a full government guarantee.