Representatives John Delaney (D-MD), John Carney (D-DE), and Jim Himes (D-CT) today introduced housing finance reform legislation that would wind down Fannie Mae and Freddie Mac.
"The legislation preserves the 30-year fixed rate mortgage and protects American taxpayers by using private sector pricing to reduce the risk of future bailouts," said the representatives in a statement.
"It shifts the housing finance market away from Fannie Mae and Freddie Mac, and keeps home ownership attainable for working families by strengthening affordable housing programs," they said.
HR 5055, available here is called the Partnership to Strengthen Homeownership Act.
Addtionally, the bill would establish an insurance program through Ginnie Mae.
All government guaranteed single-family and multi-family mortgage-backed securities will be supported by a minimum of 5% private sector capital, standing in a first-loss position. The remaining 95% of the risk will be shared between Ginnie Mae and a private reinsurer on a pari passu basis, the statement explained.
The bill winds down Fannie Mae’s and Freddie Mac’s current activities and revokes their charter, but allows them to be sold and recapitalized as entities with different business plans without any of their current unique powers, it added.
This legislation becomes the latest in a stream of legislative measures designed to reform the housing finance system in the U.S.
Currently under consideration in the Senate is Johnson-Crapo. The other primary contenders are the House’s PATH Act, the House’s HOME Forward Act, and the Senate’s Corker-Warner bill. (The full report on the measures from the Structured Finance Industry Group can be read or downloaded here.)
The Johnson-Crapo bill would wind down Fannie and Freddie within five years and had received support from the Obama administration.
But housing industry analysts believe that GSE reform appears to be dead until after the mid-term elections and likely dead until after the 2016 presidential election.
Other analysts from around the housing industry believe that the debate over housing finance reform may stretch out as far as 2017.
