Fannie Mae CEO: Don’t put off housing reform

Fannie Mae CEO Tim Mayopoulos on Thursday said it would be a mistake to delay U.S. housing reform simply because his company and sibling Freddie Mac have returned to profitability.

That’s because taxpayers remain first in line for most of the housing finance system’s losses should another crisis occur, Mayopoulos told a crowd of mostly banking lawyers in Charlotte.

“Having taxpayers (in that position) is obviously not good policy and is obviously not sustainable long term,” he said at the UNC Chapel Hill law school’s annual Banking Institute conference.

Mayopoulos, a former Bank of America executive who still commutes from Charlotte, declined to endorse any of the housing reform proposals that have emerged in Congress, many of which wind down his company over time. Last month, Senate Banking Committee Chairman Tim Johnson, D-S.D., and Mike Crapo, R-Idaho, introduced legislation that would phase out Fannie and Freddie and bring more private capital into the housing market.

Mayopoulos said clarity is needed on Fannie and Freddie’s future before private capital returns to the system.

Fannie and Freddie buy loans and package them into securities for investors.

The U.S. government placed Fannie Mae and Freddie Mac in conservatorship in September 2008 after they suffered huge losses during the financial crisis. Fannie Mae has returned to profitability and as of March 31 has paid dividends of $121.1 billion on the $116.1 billion of aid it received from the government.

Mayopoulos said any future system will need to incorporate critical infrastructure Fannie and Freddie bring to the housing finance system and should avoid “unintended consequences” that would disrupt the $10 trillion housing market.