WASHINGTON, Aug. 16 (UPI) — U.S. President Obama has told advisers to develop a proposal that would keep the government playing a major role in mortgages, sources told The Washington Post.
The sources said the proposal would extend a federal loan subsidy for most home buyers.
But the White House attempted to knock down the Post story, saying Tuesday the administration has not settled on a specific option and the Treasury Department would have a comment later on the issue.
The Post said the reported decision follows the advice of senior Obama economic and housing advisers, who favor maintaining the government’s role as the mortgage insurer for most borrowers. The newspaper said the proposal would preserve Fannie Mae and Freddie Mac, the private mortgage entities managed by the government, but give them new names and parameters.
“It is simply false that there has been a decision to move forward with any particular option,” said White House spokesman Matt Vogel, adding, “No recommendation has been made to the president by his economic advisers.”
The Post said the reported proposal is likely to draw criticism; Republicans blame the financial crisis on policies they say overly encouraged the housing market and many economists across the political spectrum think the federal role hurts the free market.
The newspaper said Obama officials have not decided whether to put forward a final proposal before the 2012 presidential election.
The government could maintain a substantial role in mortgages in several ways, the Post said, including restructuring Fannie and Freddie as public utilities. The government would no longer guarantee their financial health, but would continue to backstop the mortgage-backed securities they issue using loans made by private banks.
Or Fannie and Freddie could be shut down and replaced with several successors, the Post said.
Gene Sperling, who became director of the National Economic Council this year, agreed a continued government guarantee made sense, the Post said.