U.S. senators push bill to scrap mortgage firms Fannie, Freddie
* Lawmakers aim to jump-start debate on housing finance revamp
* Mortgage firms would be liquidated within five years
* Government would offer a catastrophic loan backstop
* New agency would collect fees to cover its costs
By Margaret Chadbourn
WASHINGTON, June 25 (Reuters) - A bipartisan group of U.S. senators will introduce a bill on Tuesday to abolish Fannie Mae and Freddie Mac and replace them with a government reinsurer of mortgage securities that would backstop private capital in a crisis.
The U.S. government seized the mortgage firms in 2008 to rescue them from insolvency, spending a total of $187.5 billion to keep them afloat. Fannie Mae and Freddie Mac, which charge lenders a fee in return for guaranteeing principal and interest on mortgages, are now posting record profits.
Under the latest discussion draft of the bill, which is being led by Tennessee Republican Bob Corker and Virginia Democrat Mark Warner, the two companies would be liquidated within five years and government reinsurance would kick in only once private creditors had shouldered large losses.
The system is designed to ensure a liquid mortgage market even in times of crisis, while protecting taxpayers from losses. Continued...