A subcommittee of the House Financial Services Committee debated yesterday and is expected to vote a handful of bills this morning that would begin the phase-out of Fannie Mae and Freddie Mac, which now finance a staggering 95% of the single-family mortgage market.

The GOP action came despite pleas from major representatives of the mortgage market, including credit unions, to wait to phase out the two secondary market companies until a replacement for their roles is imminent.

Several mortgage lobbying groups joined National Association of Federal Credit Unions (NAFCU) in asking for the Republican leaders to wait, including the Mortgage Bankers Association, the National Association of Realtors, the National Association of Homebuilders and the Financial Services Roundtable, which represents the nation’s biggest financial institutions.

The bills are being pushed by House Republican leaders who want to start the process of transferring the job of creating a secondary mortgage market to private entities – which abandoned the market during the financial meltdown of 2007 and 2008. Scott Garrett, a New Jersey Republican chairing the House panel, said his aim is to end the bailout of Fannie and Freddie, while inviting private players back into the market.

The GOP leaders, who believe the two GSEs were a major cause of the meltdown in the mortgage markets because their goals provide affordable housing and massive mismanagement, culminating in the bankruptcy of the two mortgage giants.

NAFCU told House leaders, including Garrett, its credit unions are very dependant on Fannie and Freddie for mortgage financing and hope that any system to replace them would include a government organized entity.

NAFCU President Fred Becker told Garrett in a letter it believes the GOP’s moves are “premature given there is not a concrete plan to keep a healthy secondary market in place should Fannie and Freddie cease to exist.”

The GOP bills would require Fannie and Freddie to start selling their massive mortgage holdings, reduce the size of conforming mortgages they will buy, raise guarantee fees and get express approval when issuing new MBS.

Still, the efforts by the Republican leaders were seen as just the beginning in what will be a long debate, mostly because the Democrats who control the Senate have said they will not act any time soon on Fannie and Freddie reforms.

They are waiting for a definitive plan from the Treasury Department, which has been running both Fannie and Freddie under federal conservatorship since September 2008.

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