The Obama administration will be calling on Congress to pass legislation that would allow Fannie Mae, Freddie Mac or Federal Housing Administration to refinance underwater loans in private label securities.

Senior administration officials noted the GSEs have refinanced 2 million Fannie and Freddie borrowers with high LTV loans that would have been locked out refinancing without a special HARP refinancing program.

Similar refinancings could save PLS borrowers $3,000 a year. “We believe there continues to be bipartisan support for this,” a senior official told reporters. But the “window is closing” as a result of rising mortgage rates. President Obama proposed a similar refinancing proposal in 2010 but Congress ignored it.

President Obama will discuss this refinancing and other housing initiative’s in a speech this morning in Phoenix.

The president will make clear that his administration supports winding down Fannie and Freddie as outlined in a bipartisan bill co-sponsored by Senators Bob Corker, R-Tenn., and Mark Warner, D-Va.

In briefing reporters, officials stressed that the President wants private capital to take the first hit before any government-backed catastrophic insurance kicks in.  

They don’t want to rebuild the same “failed business model,” an official said where Fannie and Freddie take all the profits and taxpayers get caught with the losses.

President Obama will also call on the Senate to “swiftly confirm” Rep. Mel Watt, D-N.C. to be the new GSE regulator and replace acting Federal Financial Housing Agency acting director Edward DeMarco.  “Our mortgage finance system needs to a confirmed and permanent FHFA director to help wind down Fannie and Freddie,” an official said.    

Administration officials indicated that Rep. Watt as the new FHFA director would continue DeMarco’s initiatives to develop a single securitization platform and develop innovative credit-risk sharing structures.

The Obama administration also supports reducing GSE loan limits “consistent with the pace of the recovery and regional differences,” an official said.

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