US treasury sets two-year deadline for housing reform

Treasury Secretary Timothy F. Geithner told the House Committee on Financial Services today that Congress must tackle reforming Freddie Mac and Fannie Mae or the government sponsored enterprises (Enterprises) will merely return to their old form.

Geithner's prepared testimony before the committee was based on the Obama Administration's White Paper, released two weeks ago, outlining its vision for reforming the housing finance market. In that vision, the Treasury Secretary said the government's primary role will be limited to consumer protection and oversight, targeted assistance for low-and moderate-income homeowners and renters; and a targeted capacity to support market stability and crisis response. In other words, the Administration is committed to a private market system subject to strong oversight, consumer and investor protections and in which the private market, not American taxpayers, bear the burden for losses.

Geithner criticized the government's long-standing role in housing finance for supporting incentives that distorted the market, created significant moral hazard, and ultimately left taxpayers responsible for the resulting mess. While all Americans should have access to affordable, quality housing, he said, the goal should not be for every American to become a homeowner. Targeted and effective support should be available to families who have the financial capacity to own a home but are underserved by the private market coupled with a range of options for Americans who rent.

Source: Mortgage News Daily