On March 26, Representative Marsha Blackburn (R-TN) introduced a bill that would stop profits made by Fannie Mae and Freddie Mac from being swept into the U.S. Department of the Treasury. Instead, the Enterprise Secondary Reserve Taxpayer Protection and Government Accountability Act of 2015 (H.R. 1673) would require profits to be placed in a secondary reserve fund that would cover any losses incurred by Fannie Mae and Freddie Mac due to a housing downturn.
The current agreement between the Treasury Department and Fannie and Freddie’s conservator, the Federal Housing Finance Agency (FHFA), directs all profits into the U.S. Treasury. As of December 31, 2014, the two companies had paid a combined $227 billion to the Treasury, almost $40 billion more than their “bailout.”
Under H.R. 1673, the FHFA Director would decide whether to use funds held in the reserve if Fannie Mae’s or Freddie Mac’s losses exceed their capital reserves. The FHFA Director would also issue regulations delineating the standards and procedures for doing so.
Funds in the secondary reserve would not be considered part of Fannie Mae’s and Freddie Mac’s “capital, capital reserve, or otherwise an asset of the enterprise” other than as part of an approved capital restoration plan.
Once the conservatorship ends, the FHFA Director would dissolve the secondary reserve fund. Any amounts left would be used first to meet capital requirements as required by law, and then be devoted to earnings.
NLIHC continues to track all legislative and regulatory activities related to Fannie Mae and Freddie Mac in order to protect current funding for the National Housing Trust Fund (NHTF), and to ensure that the NHTF is treated favorably in any housing finance reform that advances in the 114th Congress. The NHTF is to be funded not by GSE profits, but by an assessment of 0.042% on new business of Fannie Mae and Freddie Mac.
H.R. 1673 was referred to the House Committee on Financial Services.