WASHINGTON, May 15 (UPI) -- The Senate Banking Committee advanced legislation Thursday to make massive changes to the housing finance system, including getting rid of mortgage giants Fannie Mae and Freddie Mac.
It's been nearly six years since Fannie and Freddie were rescued and put into conservatorship at the height of the 2008 crisis, and the Housing Finance Reform and Taxpayer Protection Act moves to replace them with private entities.
The bill from Banking Chairman Tim Johnson, D-S.D., and ranking member Mike Crapo, R-Idaho, has the support of the White House, but is unlikely to see a full vote on the floor of the Senate this year. Although it passed out of committee with a bipartisan 13-9 majority, it was opposed by Sens. Chuck Schumer, D-N.Y., and Elizabeth Warren, D-Mass., who were concerned that the bill goes too far in tossing out the old system.
"After exhausting every option to try and strike a deal quickly that would add votes at the committee level, I have concluded it is best to move forward with the majority we have now in committee and continue working to build support for the bill as it moves to the floor," Johnson, still hopeful, said Thursday.
The bill would replace the federally controlled system with one in which the government would serve as a guarantor against major losses but would require the private sector to step up its role with funding new mortgages.
While supported by the committee's centrists, liberal members of the panel found it too disruptive, while conservatives said it left the government holding too much control of the housing market.
A separate bill in the House, which would also get rid of Fannie and Freddie, places more reliance on the private sector. It has also passed out of committee but is not expected to see a full vote this year.
Fannie and Freddie buy mortgages from lenders and package them to be sold to investors as securities while guaranteeing full payment on bonds. In 2008, they were given a $187.5 billion bailout in September 2008 during the subprime mortgage crisis caused by the expansion of purchases of high-risk mortgages.