President Barack Obama will call for Fannie Mae and Freddie Mac to be replaced with a government mortgage reinsurer that would sustain losses only in catastrophic circumstances.
The president, in a speech today in Phoenix, will also renew calls for Congress to make it easier for homeowners to refinance their loans, according to administration officials.
The president until now has refrained from endorsing a particular approach to remaking the nation’s housing finance system, seeking to avoid a partisan battle. Today he will outline basic principles that mirror those in a Senate bill backed by both Democrats and Republicans.
“A reformed system must have a limited government role, encourage a return of private capital and put the risk and rewards associated with mortgage lending in the hands of private actors, not the taxpayers,” the White House said in fact sheet released to reporters yesterday.
Obama’s trip to Phoenix is the latest campaign-style effort to put pressure on Congress to pass measures to help boost economic growth. Last week, he traveled to Chattanooga, Tennessee, and visited an Amazon.com Inc. distribution center to argue for a lower corporate tax rate, with initial revenue designated for jobs programs.
The president today also will call for passage of a new immigration law, citing home purchases by immigrants as a boon to the market, said the officials, who asked not to be identified to discuss the plan prior to Obama’s speech. While in Phoenix, the president’s itinerary includes visits to a construction company and a local high school.
Obama will announce that borrowers with foreclosures or bankruptcies resulting from a job loss will be able to finance a home purchase with a Federal Housing Administration mortgage as long as they are back at work, demonstrate 12 months of timely payments, and complete housing counseling. The FHA, a government mortgage insurer, now requires a three-year wait.
Obama’s call for a government mortgage reinsurer comes as administration officials have been quietly aiding efforts in the Senate to craft a bill that would create a new mortgage system. Tennessee Republican Bob Corker and Virginia Democrat Mark Warner in June introduced the measure, which would require private capital to take at least 10% of the first losses on mortgage securities. The government would step in with more aid during a financial catastrophe.