The future of the United States’ housing policy has taken center stage by members of the Federal Housing Finance Agency (FHFA), highlighting Fannie Mae and Freddie Mac being in conservatorship. “Congressional action is needed to resolve this situation and expand private sector participation in the U.S. housing finance market,” read the statement from the FHFA before the Senate. Sens. Bob Corker (R-TN) and Mark Warner (D-VA) authored the “Housing Finance Reform and Taxpayer Protection Act” in an effort to reform the secondary mortgage market. Their proposal would effectively replace the current system of Fannie and Freddie, the Government-Sponsored Enterprises (GSEs).
“This legislation includes a number of steps critical to establishing a stronger mortgage finance system,” said Housing Policy Council President John Dalton. “While we are studying all the details of the new bill, its introduction represents a significant step forward in the important and complex task of building a new housing finance system for the future.”
“The introduction of this bipartisan bill represents an important step in redefining the government role in housing finance and is a positive framework on which to begin this crucial debate,” said David H. Stevens, Mortgage Bankers Association (MBA) president and CEO. “Sens. Warner and Corker are to be commended for taking a thoughtful and comprehensive approach to drafting a bill to restructure the secondary mortgage market in a way that provides sufficient liquidity to the market so that lenders can offer a full range of sustainable mortgage credit to qualified borrowers through all market conditions.”
The bill proposed by Senators Corker and Warner would protect taxpayers from a future economic meltdown by replacing GSEs with a private, capitalized system. Home loans would be purchased from the originators directly, allowing for liquidity of the market. MBS securities holders would also receive expressed guaranties that would result in no greater than a ten percent loss for investors.
The Independent Community Bankers Association (ICBA) issued a statement calling on Congress to ensure (as part of Corker and Warner’s bill) that community banks aren’t forced to sell loans through an aggregator that forces them to compete with other community banks and that data related to community bank members will be kept in strict confidence. “Due to the importance of this issue to Main Street communities, the community banking industry must continue to be closely involved in the process of secondary-market reform,” read an ICBA statement. “Any and all reforms to the housing-finance system should avoid fostering even greater concentration and risk into a handful of lenders, which would only harm the financial system and consumer choice. As a result, ICBA and the nation’s community banks look forward to continuing to work with Congress on this issue as the debate continues.”
“Fannie Mae and Freddie Mac have been in conservatorship for almost five years now, and it is important that policymakers begin defining a long-term plan for the future role of the federal government in the mortgage market,” said Debra Still, CMB, MBA chairman. “The Corker-Warner bill is a significant milestone and should get policymakers headed in that direction.”
In a statement on Sen. Warren’s official site, the sponsors of the bill, Sen. Mike Johanns (R-NB); Sen. Jon Tester (D-MT); Sen. Heidi Heitkamp (D-ND); Sen. Dean Heller (R-NV); and Sen. Jerry Moran (R-KS), state “Some might say this goes too far, others not far enough. But regardless of where your political sensibilities are, you cannot think the current system works. Make no mistake; time is not on our side,” adding, “As memory of the crisis fades, the GSEs will again entrench themselves deeper and deeper into our system of housing finance. Soon, the path of least resistance will be to simply reconstitute Fannie and Freddie as they were. That would be totally irresponsible.”
Robert Ottone is an assistant editor with National Mortgage Professional Magazine. He may be reached by phone at (516) 409-5555, ext. 314 or e-mail [email protected]