U.S. mortgage agencies, defenders take on
critics
By Mark Felsenthal
WASHINGTON, July 11 (Reuters) - U.S. mortgage finance giants Fannie
Mae (NYSE:FNM - news) and Freddie Mac (NYSE:FRE - news) and their congressional supporters took
on critics Wednesday, saying there is no need to change the way the companies are regulated and
asserting they help low-income home buyers much more than their industry critics do.
At the same time, representatives of the two so-called
government-sponsored enterprises conceded their companies
have sought a delay in the review of a federal regulation that
would test their financial soundness. Review of that
regulation, known as the risk-based capital rule, is due July
16.
At a hearing before the House Financial Services
subcommittee chaired by their chief congressional critic, Rep.
Richard Baker, the two GSEs said there is no reason for
legislation proposed by the Louisiana Republican that would
toughen federal supervision of their finances.
``The existing structure is a credible structure,'' said Freddie
Mac's senior vice president for government relations, Mitchell Delk.
At the same time, both Delk and Fannie Mae Executive Vice President Timothy Howard said their
companies asked the Office of Management and Budget to further delay consideration of the long-awaited
risk-based capital standard.
``We want to make sure that the rule does not have unintended consequences,'' Delk said.
The mortgage finance giants further attacked a Congressional Budget Office study of their finances
commissioned by Baker. That study said the agencies derive a $10.6 billion benefit from lower borrowing
costs that stem from their congressional charter, which leads markets to believe the government would
bail them out of financial trouble.
CBO said the mortgage companies pass along $6.7 billion, or 63 percent of that benefit, in lower mortgage
rates. But the analysts said the GSEs retain $3.9 billion, or 37 percent, for themselves and their
shareholders.
The GSEs were sharply critical of the report at the hearing, as they have been in the past.
``Errors and omissions disqualify CBO's report from serious consideration,'' said Delk.
Fannie Mae and Freddie Mac further disputed a report by a trade association composed of industry
critics, FM Watch, that said the GSEs underserve low-income and minority home buyers. GSE efforts to
serve that market surpass those of the financial services companies that funded the report, Fannie Mae
and Freddie Mac representatives said.
``Our critics cannot begin to match such a strong track record,'' Delk added.
Democratic members of the panel expressed support for the mortgage companies, saying they are
performing the tasks set out in their congressional charter and are helping lower home ownership costs at
no real expense to the government.
``I have so far concluded that no compelling reason exists for pursuing an legislation affecting them,'' said
Paul Kanjorski, a Pennsylvanian who is the senior Democrat on Baker's subcommittee. |
