Senator Shelby Asks GAO and CBO for Reports on FHFA, GSEs

On Monday, April 18th, Senate Banking Committee Chairman Richard Shelby sent letters to the U.S. Government Accountability Office (“GAO”) and Congressional Budget Office (“CBO”) requesting Congressional reports on matters related to the Federal Housing Finance Agency (“FHFA”) and government sponsored enterprises (“GSEs”) Fannie Mae and Freddie Mac. Senator Shelby writes that recently, “FHFA has taken steps that appear to encourage a more active, rather than a reduced, role in the mortgage market for the [GSEs],” and has caused questions to be raised on this stated goal through the development of the common securitization platform. The Senator notes that the initial purpose of FHFA’s efforts, including the creation of the CSP, was to facilitate greater secondary market competition, but now it appears FHFA is no longer working towards enabling use of the CSP by other market participants.

Consequently, the Senator has asked that the GAO study and report on the extent to which FHFA’s actions could influence the GSEs dominance in the residential mortgage markets, any increase in the cost to entry for future competitors to the GSEs, the current and future demands on the Treasury, possible options for modifying the GSEs structures, and any other areas GAO finds appropriate to evaluate these issues. Of the CBO, the Senator requests a short report be commissioned which answers the following questions:

  • What are the federal government’s financial obligations to Fannie Mae and Freddie Mac while they are in conservatorship?
  • What would be the implications for the budget and the federal debt if the GSEs were to retain more of their earnings?
  • How would increasing the GSEs’ capital affect the risk borne by taxpayers? 
  • Could an increase in the capitalization of the GSEs have consequences for the operations of the GSEs or the mortgage markets?

Senator Shelby has asked that the GAO produce its report by November 1st, 2016 and that the CBO produce its report by July 1st, 2016.

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