Despite the recent political brinksmanship in Congress, Rep. Shelley Moore Capito told state community bankers Monday she's optimistic lawmakers might finally get around to reforming the nation's mortgage finance system next year.
Capito said reform would likely include shutting down government-backed mortgage financiers Fannie Mae and Freddie Mac, which were bailed out by taxpayers during the 2008 housing market collapse.
She said leaders in both parties, as well as President Barack Obama, are pushing to curtail the government's role in guaranteeing and financing mortgages to avoid another bailout, should the housing market take another turn south.
"There's a general feeling -- among Republicans and Democrats -- that we need to move that potential for another government bailout out of Fannie and Freddie and reconstitute them," Capito said.
Capito was speaking to a group of state community banking leaders attending Spilman Thomas and Battle's community banking symposium Monday at the Charleston Marriott.
The chairwoman of the House Subcommittee on Financial Institutions and Consumer Credit, Capito said lawmakers are currently looking at ways to reduce the government's liability in the mortgage finance system while at the same time ensuring that reforms don't limit mortgage lending.
"We don't want to do anything that would hurt the housing market because if we're going to ever get this economy moving and rolling, we've got to have that good housing market," she said.
Fannie and Freddie are at the heart of the nation's mortgage finance system.
While they don't make loans directly, they do buy mortgages from lenders, guarantee them against default and package them into bonds that are then sold to investors. Fannie and Freddie currently own or guarantee half of all U.S. mortgages and back nearly 90 percent of new ones.
When the housing market collapsed in 2008, the U.S. government had to sink $187 billion into Fannie and Freddie as a bailout.
Some reform opponents have said Fannie and Freddie have returned to profitability and have paid tens of billions of dollars back to the federal government.
Capito said the current situation still leaves taxpayers on the hook if anything were to go wrong. She also pointed to the $1.7 billion bailout for the Federal Housing Administration's reverse mortgage program as evidence the system needs to be reformed.
In August, President Obama backed a plan to unwind Fannie and Freddie, leaving the government responsible for guaranteeing only a small group of mortgages.
Capito's committee has passed a reform called the PATH Act that turns the system completely over to the private market.