The new platform of the Republican Party calls for downsizing the Federal Housing Administration (FHA) mortgage insurance program and winding down the “size and scope” of Fannie Mae and Freddie Mac’s secondary market activities.

“The FHA, which tripled in size to more than $1 trillion under the current administration, has crowded out the private sector and is at risk of requiring a taxpayer bailout,” says the GOP platform statement released midweek in Tampa. “It must be downsized and limited to helping first-time homeowners and low- and moderate-income borrowers.”

But the GOP statement of principles offers no specifics on how Fannie and Freddie should be “wound down.”

America Enterprise Institute (AEI) resident fellow Edward Pinto told National Mortgage News that House Republicans have approved a fiscal year 2013 budget that calls for placing a cap on GSE loan limits. (Pinto is at the convention.)

“Such a policy would reduce the number of loans the entities could back, naturally shrinking their market share,” the budget document says.

Pinto noted that it would take an act of Congress to reduce Fannie and Freddie’s loan limit.

He and two of his AEI colleagues have recommended a gradual reduction in the GSEs’ loan limits, currently capped at $625,500.

“Fannie and Freddie’s loan limits should be reduced over time. This will lead to them being phased out so that the private sector can take on more of the secondary market as the GSEs withdraw,” Pinto said. “That will lead to a solid robust housing market,” he added.

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