Fannie and Freddie white paper delayed

The Obama administration is likely to miss a January 31 deadline set by Congress to deliver its long-awaited white paper on the future of housing finance, according to people familiar with its preparation.

The paper is also likely to disappoint those who want a detailed proposal for the future of Fannie Mae and Freddie Mac, the government-sponsored enterprises whose $140bn bail-out was the costliest rescue of the financial crisis. Senior executives at the GSEs and most Republicans want a swift and comprehensive plan.

Officials have moved away from an earlier intention to present such a plan, or even full legislative language, for the two GSEs. When the paper is published it is likely to contain a number of options and suggestions for Congress, but no grand sweeping plan.

Ultimately officials want to move towards a system where the private sector plays a much greater role in the secondary mortgage market, 90 per cent of which is controlled by Fannie and Freddie because of the dearth of interest from private investors scarred after the 2008 crisis.

Scott Garrett, the Republican chairman of the House financial services subcommittee responsible for the GSEs, demanded an early and detailed plan from the administration. “I’m hoping that they will generate specific recommendations as opposed to a list of options,” he said.

Preparations for Barack Obama’s State of the Union address on Tuesday have made it difficult to go over final bureaucratic hurdles to publishing the white paper, according to people familiar with the process, who said the week of February 7 was now more likely.

“We’re working every day to plot the future of housing finance while acknowledging continued weakness in the housing market,” said the Treasury. There is also a belief within the administration that there is little to be gained by putting out detailed proposals for Republicans to attack.

Officials are also wary of damaging the still-fragile housing market and believe that much, perhaps all, of the overhaul can be completed without legislation.

The issue of the government’s role in a future housing market remains controversial. One option being considered is a government-backed securitisation mechanism that would see the industry take a “first loss position” on mortgage-backed securities, bearing the brunt of any housing downturn, but preserving a government back-stop for a collapse.

“I don’t know how you go to the taxpayers and say that we achieved what we wanted to achieve and that is that you the taxpayers, our constituents, are no longer on the hook for bailing out Wall Street if we set up a system with a guarantee,” said Mr Garrett.