Republican leaders on the House Financial Services Committee are coming under strong criticism for taking a piecemeal approach to winding down Fannie Mae and Freddie Mac while ignoring several comprehensive GSE reform bills that address the future of the housing finance system.

At a markup Tuesday, Rep. John Campbell, R-Calif., said it is a "mistake" for the GSE subcommittee to vote on six bills that would, among other things, prohibit a reduction of the 10% dividend Fannie and Freddie pay on $150 billion of borrowings from the Treasury, and eliminate their government charter if they end up in receivership.

"We should not be talking about dismantling Fannie Mae and Freddie Mac until we have a discussion on the alternatives out there," Rep. Campbell said.

Rep. Campbell and Rep. Gary Peters, D-Mich., have introduced a bill (H.R. 1895) to replace Fannie and Freddie with new entities that issue government-guaranteed mortgage-backed securities.

Two other committee members, Reps. Gary Miller, R-Calif., and Carolyn McCarthy, D-N.Y., have an alternative bill that would merge Fannie and Freddie, converting them into a secondary market utility that issues government-backed MBS.

A third GSE bill, sponsored by Rep. Jeb Hensarling, R- Calif., would completely privatize the mortgage market.

"It is clear that the Republicans are split on how to approach comprehensive reform," said Rep. Maxine Waters, D-Calif., a longtime GSE supporter. Rep. Waters called on committee chairman Spencer Bachus, R-Ala., to schedule hearings on the three reform bills as soon as possible.

Rep. Bachus countered by pointing out that the Obama administration has not produced a concrete legislative proposal for GSE reform. In the meantime, he will move forward with the six GSE bills. "We are not going to delay this any further," he said.

Industry groups like the National Association of Realtors (NAR) and National Association of Home Builders have raised objections to the GOP's approach. This piecemeal approach will "inject uncertainty into the housing finance sector during a period when the sector is struggling to recover," the Realtors say in a July 11 letter to subcommittee chairman Scott Garrett, R-N.J.

A comprehensive approach to GSE reform "must be undertaken to indicate to mortgage investors that our nation is serious about GSE reform," the NAR letter says.

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