Geithner Sets Two-Year Target on Housing Finance Reform

Treasury Secretary Timothy F. Geithner told the House Committee on Financial Services today that Congress must tackle reforming Freddie Mac and Fannie Mae or the government sponsored enterprises (Enterprises) will merely return to their old form.

Geithner's prepared testimony before the committee was based on the Obama Administration's White Paper, released two weeks ago, outlining its vision for reforming the housing finance market.  In that vision, the Treasury Secretary said the government's primary role will be limited to consumer protection and oversight, targeted assistance for low-and moderate-income homeowners and renters; and a targeted capacity to support market stability and crisis response. 

Geithner said the Administration has laid out three potential options to structure government support in a housing finance market where the private sector is the predominant provider of credit and bearer of mortgage risk.  In each, government support would be "transparent, explicit, and limited," and each would preserve FHA assistance and similar government initiatives that assist targeted groups such as low- and moderate-income families, farmers, and veterans.

Geithner said in his prepared remarks that he hopes comprehensive housing finance reform legislation will pass a Congressional vote in the next two years. He added, "Failing to act would exacerbate market uncertainty and risk leaving many of the flaws in the market that brought us to this point in the first place unaddressed.”

Following his testimony, committee members questioned Geithner about the costs involved in these options.  The Secretary said that costs to the consumer will be higher under any of the reforms but that under the first reform they would be higher than under the second or third.  Each of the longer-term reforms outlined will require action by Congress, the Secretary said, but by providing a narrow set of options and key criteria by which they should be judged, the Administration hopes to encourage an honest conversation about the merits and drawbacks of each.

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Source: http://www.mortgagenewsdaily.com/03012011_housing_finance_reform.asp

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