Testifying before the House Financial Services Committee, Treasury Secretary Timothy Geithner said that it's very important for lawmakers to start an effort to wind down Fannie Mae and Freddie Mac but further stated that it will most likely take several cautious years to complete.
Geithner indicated that future mortgage costs could be reasonably higher after the reforms are completed to the national housing finance system.
According to Geithner the housing markets are still in a very fragile state and warned the administration and lawmakers to be cautious not to jeopardize the broader economic recovery while dealing with housing finance reform.
Three weeks ago the administration released a report that suggested there be some sort of scaling back of both mortgage giants Fannie Mae and Freddie Mac as well as much of the remaining federal governments role in housing finance. The administration suggested that this winding down period should be done gradually over several years.
Geithner said, "Reforming our country's housing finance market is an essential part of our broader efforts to help ensure Americans will never again suffer the consequences of a preventable economic crisis."
As part of the winding down process for Fannie's and Freddie's roles in the market the administration wants to make some changes that does not require congressional action which will include decreasing the size of loans both companies can buy.
About half of all U.S. mortgages are guaranteed or owned by Fannie and Freddie and they both were involved in nearly 9 of 10 new mortgages over the past year since private lenders remained leery about making new loans.
Both Fannie and Freddie nearly collapsed in 2008 as the housing market crumbled, but have been sustained by $150 billion in taxpayer dollars.