Scott Garrett: “this amendment seeks to refocus the GSEs on what is their congressionally mandated responsibility, and that is…”

“this amendment seeks to refocus the GSEs on what is their congressionally mandated responsibility, and that is, providing for and promoting affordable housing. The amendment would direct the new regulator to require the enterprises to only hold mortgages and mortgage-backed securities that exclusively support affordable housing. That is, those mortgages that are extended to households falling below the area's median income in their retained portfolios. Mr. Chairman, the GSEs were created by Congress to do a couple of things. First of all, to create liquidity in the secondary market, and, very importantly here, to provide affordable housing for low and moderate families. Now, to effect this worthy goal, Congress granted these enterprises a number of advantages over private firms, including exemptions from State and local taxation, and also the ability to borrow at lower rates. In fact, Mr. Chairman, Fannie and Freddie used these advantages to borrow at interest rates barely above the Treasury rate. They then buy mortgages from originators and do one of two things; either they package these securities into MBSs, that's mortgage-backed securities, and securitize them, or they retain the purchased mortgages on their own portfolio. Interesting, the combined GSE portfolios have increased from $130 billion in the early 1990s, today it is over $1.5 trillion.”