Saturday, August 18, 2012


A Mitt Romney administration plan for a future housing finance system likely shuns any form of a government guarantee based on the Paul Ryan, R-Wisc., pick as candidate for vice president.
Ryan, as head of the House Budget Committee, released a plan that was passed by the House last year to slash spending across nearly every sector of the government, excluding the military. The plan received renewed attention after Romney selected Ryan as his vice president over the weekend from Democrats looking to target long absent specifics from the Romney campaign and Republicans hoping to recharge its base.

The selection also gives markets much needed insight into how Romney may proceed with the long-awaited reform of the government-sponsored enterprises. The long-term outlook of the Ryan plan involves a complete wind-down of Fannie Mae and Freddie Mac and an end to the $188 billion in bailouts so far.
The Ryan budget would “privatize the business of government-owned housing giants, Fannie Mae and Freddie Mac, so they no longer expose taxpayers to trillions of dollars’ worth of risk.”

The Obama administration released three options last year Congress could pursue, which includes various degrees of government support to the future mortgage market, including a completely private option. But that was where the process stopped outside of roughly 15 bills passed by the House, each largely duplicative of the conservatorship agreements.

“Taxpayers’ exposure to Fannie and Freddie, once an implicit guarantee, has now become an explicit obligation to cover its debts,” Ryan wrote in his plan. “The housing-finance system of the future will allow private-market secondary lenders to fairly, freely and transparently compete, with the knowledge that they will ultimately bear appropriate risk for the loans they guarantee. Their viability and profitability will be determined, not by political favoritism, but by the soundness of their practices and the value of their services.”

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