Trump calls for overhaul of mortgage system

President signs a memo to the Treasury Department

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The Trump administration is calling on federal agencies to draft plans to overhaul the nation's housing finance system, years after the US government seized the mortgage giants Fannie Mae and Freddie Mac.

President Donald Trump on Wednesday signed a memo directing the Treasury Department and the Department of Housing and Urban Development to develop both legislative and regulatory plans to revamp the two companies still under the government's control since the 2008 financial crisis, the White House said in a statement.

Trump's directive calls for ending the conservatorship of Fannie and Freddie and improve the federal government's regulatory oversight over them.

The Treasury Department will spearhead drafting a reform plan for the two companies, while HUD will design a separate regulatory protocol to oversee the housing finance agencies.

"The housing finance system of the United States is in urgent need of reform," the President's memo read, which noted three White House priorities: reducing taxpayer risk, expanding the private sector's role and improving access to sustainable home ownership.

Those plans should be delivered to the President "as soon as practicable," the White House said in the statement.

The presidential memo comes as the Senate Banking Committee held two days of hearings on Capitol Hill on the viability of blueprint to reform the housing finance market. The proposal was introduced by Republican Sen. Mike Crapo of Indiana, chairman of the panel, in February.

"I have long said that the status quo is not a viable option, and I consider it a top priority this Congress to find a comprehensive solution," said Crapo on Tuesday in his opening remarks at the hearing.

A spokeswoman for the senator did not immediately respond to comment from CNN on the President's initiative.

Policy analysts were quick to note there were few signs of progress reform, a top priority for Crapo.

"Nothing we heard ... on reform of Fannie and Freddie convinced us that Congress is ready to act," wrote Jaret Seiberg, managing director at Cowen Washington Research Group, in a note to clients.

Fannie and Freddie, along with other government-insured mortgages, currently dominate the mortgage market with roughly 70% of all mortgages touched by the federal government.

Treasury Secretary Steven Mnuchin has previously said he would prioritize working with Congress this year on a bipartisan basis to fix the government-sponsored enterprises and relinquish them from conservatorship.

In a statement on Wednesday, the secretary endorsed the President's move, saying, "We support a system that provides for access to lending for hardworking Americans, while also protecting taxpayers from risk."

Among the criteria laid out in the presidential memo includes asking Treasury to craft a plan that would minimize risks to the financial system, provide that the federal government be "properly compensated" for any explicit or implicit support it provides to the GSEs or the secondary mortgage market.

Treasury's reform plan should also preserve homeowners access to 30-year fixed-rate mortgages, establish adequate capital and liquidity requirements for Fannie and Freddie and expand the private sector's share of the US mortgage market, among other factors. The White House is also asking the agency to specify whether each proposed reform would require approval from Congress or could be done administratively.

The President also asked HUD to prepare a list of its own reform proposals, including determining the benefits and risks tied to providing assistance to first-time homebuyers, including down payment assistance.

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