The majority of Americans believe that the government is not doing enough to prevent another taxpayer-funded bailout of Fannie Mae and Freddie Mac, and also that the private sector should bear most of the risk on mortgage loans that default, according to the results of a poll released by U.S. Mortgage Insurers (USMI).
Top Obama officials Jack Lew (Treasury Secretary) and Antonio Weiss (Counselor to the Treasury Secretary) have stated that the FHFA’s conservatorships of Fannie Mae and Freddie Mac—now more than seven years old—will not end during the Obama Administration despite repeated urging from many lawmakers and civil rights groups. Those calling for the end of the conservatorships have expressed concern that taxpayers remain on the hook should the GSEs need another bailout similar to the $187.5 billion rescue they received in 2008.
Respondents in USMI’s survey expressed similar sentiments. Almost half of the survey’s respondents, 49 percent, stated that they believe that the government is not doing enough to reduce the risk of a taxpayer-funded bailout of the two GSEs. Likewise, a majority of the respondents (48 percent) believe that the private sector should bear the risk for the responsibility on mortgage loans that go bad. Nineteen percent said that borrowers should shoulder the losses, and 12 percent said it should be the government.
More than half the survey’s respondents (54 percent) said they would support legislation requiring more private capital, such as additional mortgage insurance, that would reduce the losses taxpayers would absorb should mortgage loans default.
The survey was administered by Morning Consult on behalf of USMI between October 8 and 12, 2015, and the sample size was 2,002 registered voters. The poll was released in advance of an Urban Institute/CoreLogic Forum on risk sharing titled “Credit Risk Transfer: Making a Successful Program Even Better.”
For the most part, both sides of the political aisle agree that GSE reform is needed, but the sides cannot agree on what should replace them. Legislation has been introduced, notably by Sen. Bob Corker (R-Tennessee) to attempt to end the conservatorships and privatize Fannie Mae and Freddie Mac, but has not made any headway. Remarks from Lew and his counselor, Weiss, in the last few months indicate that the issue of ending the conservatorships is not on the Obama Administration’s list of priorities heading into its final year.
USMI’s survey comes one week after U.S. Reps. Stephen Lee Fincher (R-Tennessee) and Mick Mulvaney (R-South Carolina) revisited concerns expressed last year over another potential taxpayer bailout of the GSEs. Fincher and Mulvaney wrote a letter to Lew and FHFA Director Mel Watt asking the regulators to consider what effect the zero capital requirement for the GSEs will have on the economy and the potential risk it poses to taxpayers and the financial system. The lawmakers asked Lew and Watt what steps their respective Agencies can take in the near term to “rectify the situation.”