US Republicans begin to chip away at Fannie, Freddie

WASHINGTON, April 6 (Reuters) – Republicans in the U.S.
House of Representatives have started to chip away at mortgage
finance giants Fannie Mae (FNMA.OB: Quote, Profile, Research) and Freddie Mac (FMCC.OB: Quote, Profile, Research),
taking the first legislative steps to reduce their role in the
$10.6 trillion U.S. residential mortgage market.

The House Financial Services subcommittee responsible for
overseeing Fannie Mae and Freddie Mac approved eight narrowly
crafted bills late on Tuesday and early Wednesday targeting the
two firms, including one that would sharply cut the pay of
their executives.

Republicans are pushing hard to curtail the role the two
government-controlled firms play as part of a broad effort to
scale back the government’s role in housing. Democrats are more
sympathetic to a continued, but smaller, government role.

The votes, largely but not entirely along party lines,
marked the first concrete steps in what is expected to be a
years-long process of winding down Fannie Mae and Freddie Mac.

The largest providers of U.S. residential mortgage funds
were seized in late 2008 by the Bush administration as losses
mounted from mortgages gone sour in the housing market collapse
and ensuing financial crisis.

Then-Treasury Secretary Henry Paulson placed the two firms
into conservatorship, a status meant to be temporary as the
government figured out what to do with them.

The Obama administration in February unveiled a white paper
providing three long-term options for overhauling the structure
of the two firms and several short-term steps that could be
taken to reduce their influence more immediately.

The bills approved by the panel are mostly legislative
versions of those short-term steps, including an increase in
the fees charged by the two firms to guarantee mortgages
against default. An increase in the fees would make it easier
for private firms to compete with the two mortgage finance
(Reporting by Corbett B. Daly; Editing by Dan Grebler)

US Republicans begin to chip away at Fannie, Freddie