(Reuters) – The leaders of the Senate Banking Committee on Tuesday announced an agreement on legislation to wind down government-owned mortgage financiers Fannie Mae and Freddie Mac, jump-starting a long-standing debate that could still take years to resolve.
Committee Chairman Tim Johnson, a Democrat, and Senator Mike Crapo, the panel’s top Republican, outlined the plan in bullet point format after months of talks that included input from the Obama administration. They said they intended to introduce a bill soon, with an eye to having the panel vote on it within weeks.
Fannie Mae and Freddie Mac, which own or guarantee 60 percent of all U.S. home loans, provide a steady source of mortgage funds by buying loans from lenders and packaging them into securities they sell to investors with a guarantee.
Their central role in the mortgage market led the government to bail them out to the tune of $187.5 billion in the midst of the 2007-2009 financial crisis, and lawmakers want to make sure taxpayers are never on the hook again.
Under the outline from Johnson and Crapo, private interests would take the first 10 percent of any mortgage losses, before an industry-financed government backstop would kick in.