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Shelby’s Banking Proposal Would Also Determine Future Of Fannie Mae

By Michael Ide

Senate Banking Chairman, Richard Shelby (R-AL) released draft banking reform legislation earlier today, and while changes to the Dodd-Frank Act and possible Federal Reserve reforms have gotten the most attention, the bill would also clarify the future of Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC). The legislation would direct the Federal Housing Finance Agency to make the Common Securitization Platform (CSP) increasingly independent of the GSEs and then transition it to a non-profit entity that could work with approved issuers other than Fannie Mae and Freddie Mac.

The section starts off by putting limits on how Fannie Mae and Freddie Mac can be managed: guarantee fee increases can’t be used to fund anything beyond normal GSE business functions or housing finance reforms passed by Congress. One of the criticisms of the full income sweep (certainly not the only one) is that money earned by the GSEs is getting sucked into the Federal budget instead of being used to rebuild them. This wouldn’t affect the income sweep, but it would stop further g-fee increases from being used to fund other parts of the government.

Read the full article: Shelby’s Banking Proposal Would Also Determine Future Of Fannie Mae