Senate Democrats Ramp Up Scrutiny of Trump’s Fannie-Freddie Plan

(Bloomberg) -- It’s been three months since the Trump administration released its plan to end government control of Fannie Mae and Freddie Mac and Democratic lawmakers still have unanswered questions, lots of them.

In a Tuesday letter, Senate Banking Committee Democrats put almost two dozen queries to the Treasury Department and Federal Housing Finance Agency, the companies’ regulator. Topics ranged from the potential impact releasing Fannie and Freddie will have on the trillions of dollars in mortgage securities that the companies backstop to whether housing costs will rise.

Virginia Senator Mark Warner, Presidential candidate Elizabeth Warren and other Democrats who signed the letter said their questions are crucial in assessing whether the administration’s proposals will ensure “housing access and affordability, and the continued success of the secondary mortgage market.” The lawmakers urged a “prompt response” to their letter, which reflects ongoing concerns that President Donald Trump might try to bypass Congress in freeing Fannie and Freddie.

Treasury’s September plan suggested dozens of reforms to protect Fannie and Freddie from another housing crash, shrinking their dominant market shares and creating new entities to compete with the companies. But specific details, such as determining how much capital Fannie and Freddie will need to survive a financial crisis and how they will raise it, still need to be ironed out.

Spokesmen for Treasury and the FHFA didn’t immediately respond to requests for comment.

Democrats requested responses on a variety of topics including:

• What concerns have been raised by investors over the idea of releasing Fannie and Freddie from conservatorship without an “indefinite” backstop of the companies’ mortgage bonds?
• What capital levels would Fannie and Freddie need to be stand-alone companies? Would Treasury and FHFA considering ending the conservatorships before the companies hit those capital levels?
• What further changes is the Trump administration considering making to a policy implemented under President Barack Obama that required Fannie and Freddie to send their profits to the Treasury?
• Under what circumstances would the Trump administration considering entering into a consent agreement to accelerate the release of Fannie and Freddie?
• Will Fannie and Freddie continue to contribute to affordable-housing programs?

To contact the reporter on this story: Elizabeth Dexheimer in Washington at edexheimer@bloomberg.net

To contact the editors responsible for this story: Jesse Westbrook at jwestbrook1@bloomberg.net, Gregory Mott

©2019 Bloomberg L.P.