WASHINGTON—Senior Trump administration officials are discussing how to jump-start an overhaul of mortgage finance, with the new federal overseer of
pledging to act with “a great sense of urgency” over the coming months.
“The foundations of our mortgage finance system remain vulnerable, and we must not let this opportunity for reform pass,” Mark Calabria, the new head of the Federal Housing Finance Agency, said in his first public remarks on Monday. His agency regulates Fannie and Freddie, the two mortgage-finance companies that back about half of the U.S. mortgage market.
As the FHFA’s new chief, Mr. Calabria is set to play a critical role in the Trump administration’s efforts to address a remnant of the financial crisis: Washington’s control over Fannie and Freddie, which have been under government conservatorship since the 2008 financial crisis.
The Senate confirmed Mr. Calabria along party lines this month.
Mr. Calabria’s comments come after Treasury Secretary Steven Mnuchin said in an interview last week that he wants to develop a plan to overhaul Fannie and Freddie over the next six months. Doing it through legislation would be the administration’s first choice, he said, but it would look for “things we could do on an administrative basis” absent action from Congress, he said.
There are limits on what the administration can do with Fannie and Freddie absent legislation. But the FHFA has the authority to raise fees on lenders and adjust the size of loans the companies can buy, among other things. Such changes could make it more expensive for home buyers to obtain a mortgage, at least at the margins.
Fannie and Freddie don’t make loans but instead buy them from lenders and package them as bonds. The middleman role makes the popular 30-year fixed-rate mortgage more widely available by matching banks and other lenders with investors, such as pension funds that are willing to manage the interest-rate risk associated with long-term, fixed-rate mortgages.
Mr. Calabria previously advocated for the elimination of government support for the 30-year fixed-rate mortgage, but at his February nomination hearing he pledged to preserve the product.
For more than a decade, lawmakers have tried and failed to overhaul Fannie and Freddie. The White House is now making a renewed push, with the goal of returning the companies to private hands over the coming years.
President Trump last month directed his administration to develop a plan to promote “competition in the housing-finance market and create a system that encourages sustainable homeownership and protects taxpayers against bailouts.” The details of that plan are being hashed out by a handful of policy makers, including Mr. Calabria and aides to Mr. Mnuchin.
Treasury officials are conducting broad outreach to the industry on their coming plan, according to people familiar with the discussions. Trump officials are focused on an overhaul now because they fear it will be impossible to make headway during his re-election effort.
The officials are asking groups to answer a number of questions about what they think a housing-finance overhaul could look like, including whether there is room for new competitors to Fannie and Freddie, the people said.