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Waters Introduces Housing Finance Reform Proposal


Rep. Maxine Waters (D-CA), ranking member of the House Financial Services Committee has unveiled a comprehensive proposal for reform of the housing finance system. Known as the Housing Opportunities Move the Economy (HOME) Forward Act of 2014, the legislation effectively puts an end to Fannie Mae and Freddie Mac. The climate in Washington certainly seems centered around putting an end to the GSEs, a concept Federal Housing Finance Agency (FHFA) head Mel Watt has been supportive of since before he took office.

In the wake of the GSEs repaying their debt from the government bailout, many no longer see a need for neither Fannie or Freddie to remain in operation.

“Reforming a $10 trillion housing finance market is an immense undertaking that must be carefully considered,” said Rep. Waters. “Fannie Mae and Freddie Mac’s return to profitability and repayment of taxpayer dollars has led some to rightly speculate whether the enterprises need any reform at all. I believe that we have an opportunity to address some of the fundamental flaws of the current system, by ending the perverse incentives created by Fannie Mae and Freddie Mac's ownership structure and providing an explicit government guarantee that is paid for by industry.”

Waters’ legislation builds upon work previously accomplished by Sens. Bob Corker (R-TN) and Mark Warner (D-VA) and, more recently, Sens. Tim Johnson (D-SD) and Mike Crapo (R-ID).

“This is another demonstration that Congress is serious about the need to reform the housing finance system by winding down Fannie Mae and Freddie Mac and replacing them with a new structure that provides more private capital and maintains liquidity,” said Financial Services Roundtable (FSR)’s Housing Policy Council President John Dalton. “We are reviewing the HOME Forward bill, as well as other recently-released GSE reform legislation and continue to urge Congress to continue its bipartisan progress toward a more stable housing finance system.”

“It is critical that we vote on reforming our broken housing system,” Ranking Member Crapo said. “We have produced a strong, bipartisan product, and I look forward to working with my colleagues to move this legislation forward and end the five year-plus status quo.”

General reception to Waters’ reform bill has been warm, pretty much unanimously.

“Ensuring community banks can continue to sell individual loans for cash and retain servicing on those loans is necessary to provide for the continued flow of mortgage credit to consumers nationwide. ICBA looks forward to reviewing the HOME Forward Act and will continue working with Congress and the administration to ensure housing-finance reforms support our nation’s community banking system,” said Camden R. Fine of the Independent Community Bankers of America (ICBA).

“I am hopeful that this legislation will continue to move the conversation on housing finance reform forward," Rep. Waters said. "While there are differences, this legislation and the two bipartisan proposals in the Senate embrace a number of common themes. These include preserving the 30-year, fixed rate mortgage, protecting taxpayers from the costs of a housing downturn by establishing a strong new regulator, and ensuring that small and community financial institutions can participate in the new system."

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