Sen. Bob Corker wants Uncle Sam out of home financing

With a tone that indicated desire for applause, U.S. Sen. Bob Corker, R-Tenn., told a local real estate group Wednesday that homeowners and Realtors "cannot continue with Fannie [Mae] and Freddie [Mac] as they are today."

Corker paused, waiting for claps.

"No applause there, I noticed," he said to laughs.

The line came as he closed a speech to the Greater Chattanooga Association of Realtors, where Corker spoke as part of a statewide tour to generate support for a bill that challenges the fundamental tenets of the housing industry.

"We don't like change," said Eleanor Mitchell, a Realtor for Fletcher Bright Co. "But we're in jeopardy if we stay like this."

The Federal National Mortgage Association, known as Fannie Mae, and the Federal Home Loan Mortgage Association, known as Freddie Mac, are the government-sponsored enterprises that buy mortgages from lenders before grouping them into securities on the secondary market.

The government absorbed both entities at the height of the financial crisis, and Uncle Sam now owns about half of all mortgages, most new home loans and the exposure that comes with them.

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The entities have received more than $160 billion in government bailouts.

Introduced in November, Corker's Residential Mortgage Market Privatization Act would gradually end dependence on Fannie Mae and Freddie Mac for housing financing without a definite substitute.

Whether Corker's bill would stimulate the housing industry depends on his assumption that investors in a hypothetical private market -- what he calls "the to-be-announced futures market" -- would fill the giant void currently occupied by Fannie Mae and Freddie Mac.

Corker said the National Association of Realtors, the local association's parent affiliate, has criticized his efforts. Federal Election Commission records show the trade group gave Corker's re-election campaign $2,000 a few months before he introduced the bill.

"Everybody loves free enterprise and limited government until it affects them," Corker said.

But judging from a standing ovation and a friendly question-and-answer session that followed, most local Realtors agreed that Fannie and Freddie must change.

"When you've got a big, huge, monolithic entity trying to manage small consumer loans, I think it can be problematic," said Benjamin Pitts, a Realtor with Herman Walldorf Commercial Inc. "It results in things like $100 houses."

A building magnate before he went into politics, Corker emphasized "setting standards" as a potential attraction for private investors.

As proposed, Corker said his plan would require a 5 percent minimum down payment from home buyers, plus additional standards for debt-to-income ratios and loan documentation. In his speech, Corker also said the bill may require future homeowners to "show you have a job."

Tennessee's junior senator stressed that he doesn't plan to push the bill toward passage -- "prime time" as he called it -- until he has a Democratic co-sponsor. He described his proposal as a bipartisan "discussion bill" he hopes will result in unwinding Fannie and Freddie.

"I don't like to message to people and everybody cheer me because I sent a message out there," Corker said. "I like to solve our country's problems."

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