Two key House lawmakers on Wednesday added to a bill tightening regulations on mortgage giants Fannie Mae and Freddie Mac to a provision directing funds to Hurricane Katrina victims, MarketWatch reported today.
Under a proposal by Reps. Michael Oxley, R-Ohio, and Richard Baker, R-La., a House bill would send some after-tax profits earned by Fannie Mae and Freddie Mac to victims of the hurricane that hit Baker’s home state and others on the Gulf Coast, media reports said.
“This is an extraordinarily important step,” Baker told a new conference, adding he has a high degree of confidence the bill will make it through the House, MarketWatch reported.
Oxley, who chairs the House Financial Services Committee, said he’s aiming for a House vote on the bill next week, according to media reports.
Fannie and Freddie would have to reserve 3.5 percent of after-tax income for the affordable housing fund for the first two years, then 5 percent in later years, under the proposed legislation, reports said. The fund expires in five years, according to reports.
House lawmakers passed a version of the bill earlier this year, requiring the two government-sponsored enterprises to set aside 5 percent of their after-tax profits to fund construction or rehabilitation of low-income housing for renters or buyers, reports said.
The bill passed the House Financial Services Committee but stalled on the House floor in the face of opposition from conservative lawmakers, according to reports. The Senate Banking Committee left the provision out of the legislation it passed about Fannie and Freddie oversight, MarketWatch said.
Both the House and Senate bills primarily deal with oversight of the giant mortgage companies, which have endured multibillion-dollar accounting scandals.
The Office of Federal Housing Enterprise Oversight last year uncovered accounting violations at Fannie Mae, setting off investigations by the Securities and Exchange Commission and the U.S. Justice Department and several shareholder lawsuits. As a result, the company will have to restate earnings by as much as $12 billion.
In December 2004, Fannie Mae replaced Franklin Raines, its chairman and CEO, who announced he was taking early retirement, and Fannie Mae’s chief financial officer, Timothy Howard, resigned Dec. 21.
Fannie Mae’s financial accounting troubles have drawn shareholder lawsuits and investigations by the Justice Department and the Securities and Exchange Commission.
Freddie Mac, Fannie’s fellow major government-sponsored enterprise, also experienced a management shakedown in 2003 when accounting irregularities surfaced. The company has since restated several past years’ earnings amounting to approximately $5 billion. And The Office of Federal Housing Enterprise Oversight fined the company $125 million.
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