Mnuchin Opposes Recap and Release of Fannie and Freddie

Filed in Capitol Hill, Housing Finance by on January 24, 2017 0 Comments

real estateSteven Mnuchin, President Trump’s pick to be Treasury secretary, said that he opposed “recap and release” for Freddie Mac during his Senate confirmation hearing on Jan. 19.

While  the  phrase “recap and release” has varying interpretations, it generally refers to a plan that would allow the two mortgage giants to rebuild their capital reserves and then be released from their current government conservatorship while retaining their current public-private charters. For the past nine years, Fannie Mae and Freddie Mac have been under government control, a situation that most policymakers in Washington agree is untenable.

NAHB also opposes recap and release because it would resume Fannie Mae’s and Freddie Mac’s pre-crisis practice of trying to serve a public mission while satisfying private shareholders. This arrangement allowed the shareholders to benefit in good times while taxpayers bore all the risk.

NAHB is urging Congress to undertake a comprehensive solution that would gradually transition Fannie Mae and Freddie Mac into a private-sector oriented system in which the federal government provides a limited backstop for the mortgage market that would be triggered only in specific and catastrophic circumstances after private market resources are exhausted. Such a system would protect the 30-year mortgage, provide certainty and stability to the marketplace and encourage more private investment in the nation’s mortgage markets.

During his hearing, Mnuchin said the nation needs housing finance reform and he would seek to find a bipartisan solution.

NAHB remains fully engaged with the Trump administration and members of Congress on this issue.

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