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AGENCY REVIEW A LOOK AT THE GSES' LATEST DELINQUENCY NUMBERS AND TOP HEADLINES 5.59% fannie single family freddie single family 5.07% May 2013 fannie » 2.83% freddie » 2.85% 4.55% 4.03% 3.51% 3.00% 2.48% note: Delinquent loans reported here include all single-family loans 90 or more days past due as a percentage of portfolio size. Historical data covers a moving 12-month period. Source: Fannie Mae May 2013 Monthly Summary and Freddie Mac May 2013 Monthly Volume Summary. 1.96% 1.44% 0.92% 0.40% /13 /13 04 05 /13 /13 02 03 /12 /13 12 01 /12 /12 11 /12 10 /12 09 08 /12 /12 06 07 /12 /12 05 /12 04 03 /12 /12 02 /11 01 /11 11 12 /11 /11 10 /11 09 /11 07 08 /11 /11 06 05 House Republicans Propose Act to Save Housing Finance With criticism for the Obama administration and the shortcomings of the Dodd-Frank Act, the House of Representatives Financial Services Committee announced last month a new plan to fix housing finance and end the bailout of the nation's two largest mortgage companies for good. The Protecting American Taxpayers and Homeowners Act (PATH) aims to end the federal bailout of Fannie Mae and Freddie Mac within five years, increase competition in the housing finance market, and offer consumers more choices when shopping for mortgages. "The Obama administration has had five years and has failed to offer any plan at all. It's time for action," said Jeb Hensarling (R-Texas), committee chairman. After 11 hearings comprised of testimonies from 41 witnesses during the previous five months, the committee deemed the PATH Act superior to Dodd-Frank and offered assurances that it will protect both taxpayers and homeowners. According to the committee's announcement, the hearings revealed "failed 22 Washington policies," fraud among executives, and a government response that causes more harm than good. Witnesses charged Fannie Mae and Freddie Mac executives with "financial fraud" and said the companies "exploited their government guarantee to take on enormous risk," according to the House committee's statement. When Congress stepped in to set the housing finance system on the right track with Dodd-Frank, they instead "compound[ed] the government's disastrous foray into housing policy through onerous regulations that hobble the private mortgage market and lock out thousands—if not millions—of qualified borrowers who will be unable to obtain an affordable mortgage," committee members stated. The PATH Act, instead, sets a defined five-year plan for phasing out the GSEs and ending their bailouts, encourages private capital in the housing market, and sets goals to redefine the mission and size of the Federal Housing Administration (FHA), according to the committee. At the end of the five years, the GSEs would have their government charter revoked and would be liquidated under the House plan. In the meantime, the act would require the GSEs to reduce their mortgage-backed securities (MBS) portfolios by 15 percent per year down to $250 billion. In addition, at least 10 percent of the GSEs' new business each year would be part of a risk-sharing program in which part of the risk is absorbed by the private market. The PATH Act also specifies that the FHA should stick to a goal of assisting firsttime borrowers and low- and middle-income homeowners except in times of "significant credit contraction." "Our proposals would allow the housing finance market to function without the unprecedented government intervention we have seen in recent years," said Rep. Randy Neugebauer (R-Texas), committee member. "We'll also reduce the probability of the boom and bust cycles that have hurt our economy and American families." The plan put forth by the House Financial Services Committee is similar to that of its senatorial counterpart in that both call for winding down Fannie and Freddie within the span of five years. The Senate Banking Committee's bill, however, would transfer the utility duties and functions of the GSEs to a newly created federal agency at the conclusion of the fifth year. In addition, the Senate bill requires private market participants to hold 10 percent of the first loss of any MBS that purchases a government reinsurance wrap and calls for the elimination of the enterprises' affordable housing goals, replacing them with "more transparent and accountable" counseling and rental assistance programs. "Our new access fund—paid for not by taxpayers but through a small assessment on only those loans that go through the government platform—is dedicated to the sustainability of homeownership and to providing decent rental opportunities, while making it very clear where the money goes and putting in place strict criminal penalties against misuse," according to an op-ed published on Politico and authored by members of the Senate Banking Committee. KNOW THIS For GSE loans modified throughout 2011, some 70% were current and performing after nine months, FHFA reported to Congress.