Obama Win May Speed Up GSE Reform: Street Whispers

Tickers in this article: FNMA FMCC

NEW YORK (TheStreet) --Taking on reform of Government Sponsored Enterprises Fannie Mae (FNMA) and Freddie Mac(FMCC) is the new third rail of politics in the wake of the 2008 subprime housing crisis, but the fact that President Obama has won reelection may speed things up.

Republicans have been eager to tar Democrats with responsibility for creating the housing crisis by spurring excess demand for home loans through subsidies from mortgage giants Fannie and Freddie. However, neither Republicans nor Democrats have been too eager to replace the GSEs since they are the only thing keeping the housing market afloat.

"Today, the government touches more than 9 out of every 10 mortgages. In practical terms, this means that taxpayers are accountable for 90 percent of mortgages in this country. It is imperative that we work to transition the mortgage market to a more secure and sustainable and competitive model," said Edward DeMarco, acting director of the Federal Housing Finance Agency, which oversees the GSEs, in a Sept 13 speech.

Keefe, Bruyette & Woods analyst Brian Gardner reasoned prior to the election that if Mitt Romney were to win, he would be reluctant to take on GSE reform for fear that housing would crash and kill his chances for reelection in 2016. Now that Obama has won, GSE reform is "on the table during the next two years," Gardner wrote in a note published last week. Still, he hastened to add in his note that "the exact parameters of a GSE/mortgage finance bill are unclear."

Indeed, the Obama Administration has been mum on the subject of GSE Reform since issuing a four page outline of three different proposals in February 2011. . However, that paper--already frustratingly scant on details--was the product of Tim Geithner's Treasury, and Geithner has made it clear he will resign as soon as he can.

With nothing less than the entire US housing market at stake, expect that lobbyists of all stripes will be polishing their pitches to politicians in the coming months.

-- Written by Dan Freed in New York.