NCPA - National Center for Policy Analysis


June 27, 2005

In an attempt to "reform" Fannie Mae and Freddie Mac, House Financial Services Committee chairman Mike Oxley has sponsored a bill that will make the two government-sponsored mortgage giants more financially unstable, while leaving homebuilders bubbling with joy, says the Wall Street Journal.

At issue is the creation of a new "affordable housing fund" which is nothing more than a slush fund for the housing industry, says the Journal:

  • The fund would cost about $600 million annually and require about 5 percent of Freddie's and Fannie's after-tax income, or about $3 billion over five years.
  • It raises the dollar limit on mortgages that Fannie and Freddie can purchase from $359,650 to about $540,000.
  • Furthermore, the Oxley measure does little to limit mortgage-backed securities (MBS) portfolios, a key reform that both the Federal Reserve and the Treasury say is needed.

Homeownership rates are at a record 69 percent, with low-income buyers increasingly able to tap no-down payment, or interest-only repayment, loans. The economic risk in real estate today is that many people are buying homes they won't be able to finance if mortgage rates rise. This is also one of the dangers of putting so much housing risk in two giant companies, Fannie Mae and Freddie Mac, says the Journal.

Source: Editorial, "Mr. Oxley's Slush Fund," Wall Street Journal, June 14, 2005.

For text (subscription required):,,SB111870629834158611,00.html?mod=opinion&ojcontent=otep


Browse more articles on Tax and Spending Issues