New Bill on Freddie Mac, Fannie Mae

Another U.S. lawmaker is readying a bill to beef up supervision of mortgage finance firms Fannie Mae and Freddie Mac after accounting woes at Freddie Mac, aides said Monday.

Rep. Edward R. Royce (R-Fullerton), a member of the House Financial Services panel, would create a new regulator for the companies and the Federal Home Loan Banks under the Treasury Department, a Royce spokeswoman said.

Also, sources close to the situation said Fannie Mae has discussed with the Treasury Department a plan to create a new mortgage finance regulator there.

Royce’s proposal comes after Freddie Mac announced the departure of its top three executives last month after revelations of accounting errors. The company acknowledged later it had manipulated its accounting to deliver steady earnings growth and would restate its results upward for the last three years by as much as $4.5 billion.

The chief congressional critic of the mortgage giants, Rep. Richard H. Baker (R-La.), said last month that Freddie Mac’s accounting missteps, which it blamed on internal and outside accountants, demonstrated poor government supervision. He proposed abolishing the current regulator, the Office of Federal Housing Enterprise Oversight, and creating a new one.

Shareholder-owned and congressionally chartered, Fannie Mae and Freddie Mac are central players in the U.S. housing market, one of the few healthy areas of a soft economy. The firms, which buy mortgages from lenders and hold them or repackage them as securities, own or had guaranteed 44% of the $6.7-trillion U.S. mortgage debt outstanding as of late last year.