Bill To Tighten Reins Over Fannie Mae, Freddie Mac Clears House

WASHINGTON (AP) _ Legislation to tighten federal oversight of the two biggest buyers of home mortgages, Fannie Mae and Freddie Mac, cleared the House Tuesday. <br/><br/>However, the bill could lose the

Tuesday, May 22nd 2007, 7:12 am

By: News On 6

WASHINGTON (AP) _ Legislation to tighten federal oversight of the two biggest buyers of home mortgages, Fannie Mae and Freddie Mac, cleared the House Tuesday.

However, the bill could lose the critical support of the Bush administration because of a new provision trimming the authority of federal regulators.

The vote in the House was 313-104 for the measure providing for stricter federal supervision of the two government-sponsored companies, which together finance or guarantee more than three-quarters of U.S. home mortgages. The legislation also would create a housing aid fund _ worth as much as $3 billion _ to be financed by Fannie Mae and Freddie Mac.

The legislation is the product of a compromise between majority Democrats in the House and the administration.

Multibillion-dollar accounting scandals that roiled Fannie Mae and Freddie Mac in recent years brought demands for tighter government supervision and cuts in the companies' massive mortgage holdings, now worth a combined $1.5 trillion.

But in House action last Thursday, the bill was reshaped in a way that lessens the power of the new federal regulator of Fannie Mae and Freddie Mac over their mortgage holdings, compared with an earlier version that moved through the House. An amendment adopted by voice vote puts some restrictions on that authority.

The Bush administration has insisted that the new regulator have the discretion and authority to reduce the companies' mortgage portfolios. White House support is considered crucial to the bill's prospects in the Senate and for eventual congressional passage, following years of failed efforts to enact such legislation.

In Thursday's debate, a partisan split was evident over the bill's provision creating a housing aid fund.

An estimated $500 million to $600 million a year from the companies' profits would go to the five-year fund, which would be used to build and rehabilitate housing for low-income people. In the first year, the money would go for housing for victims of hurricanes Katrina and Rita.

Diverting company profits to the housing fund would impose a ``mortgage tax'' on every home loan financed by Fannie Mae and Freddie Mac, Republicans said, thereby making middle-class homeowners pay for the fund.

In addition, the White House said it was concerned the fund could be ``susceptible to political influences that could compromise the goals of assisting as many low-income families in need as possible.''

Republicans said no money from the fund should go to community groups that run voter registration drives.

Fannie Mae and Freddie Mac were created by Congress to pump money into the mortgage market by buying home loans from banks and other lenders, to keep interest rates low and make home ownership affordable for low- and moderate-income people. The companies bundle the mortgages into securities for sale on Wall Street.