Reps. John K. Delaney (D-MD), John Carney (D-DE), and Jim Himes (D-CT) have introduced innovative housing finance reform legislation, the Partnership to Strengthen Homeownership Act (HR 5055). This legislation preserves the 30-year fixed rate mortgage and protects American taxpayers by using private sector pricing to reduce the risk of future bailouts. 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.
The Partnership to Strengthen Homeownership Act combines the federal government’s unique ability to provide capacity with the private sector’s superior ability to price and analyze risk. Joining Delaney, Carney, and Himes are nine additional original cosponsors: Reps. Jared Polis, Denny Heck, Bill Owens, Kyrsten Sinema, Patrick Murphy, Peter Welch, David Scott, Gregory Meeks and Bill Foster.
HR 5055 establishes an insurance program through Ginnie Mae whereby it makes available the full faith and credit of the federal government, while protecting taxpayer dollars through adequate private sector capital and accurate pricing of government reinsurance. 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 percent of the risk will be shared between Ginnie Mae and a private reinsurer on a pari passu basis.
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.
“America needs housing finance reform for the long-term health of the economy, the viability of the American Dream of homeownership, and the protection of the U.S. taxpayer. Congress has to act and we are committed to keeping housing finance reform on the agenda,” said Rep. Delaney. “We’ve seen what happens when the housing market becomes distorted and policy fails the public: hard-working Americans lose their homes, the economy slumps and the taxpayer is left responsible. By maintaining a government guarantee, introducing private sector pricing and increased taxpayer protections, our legislation can bring both sides of the aisle together. Neither side has a monopoly on good ideas and I look forward to working with my colleagues and stakeholder groups so that we can stabilize the housing finance market for decades to come.”
“The driving force behind my work on this bill is to keep home-buying affordable by preserving the thirty-year fixed rate mortgage, while protecting taxpayer dollars in the event of another housing downturn,” said Rep. Carney. “We aren’t the first group to try to find a solution to reforming our housing finance system. But we think our proposal has promise because it strikes the necessary balance between public and private sector involvement in the housing market. If we don’t fix the current system, taxpayers continue to be the backstop in case of another crisis, and the 30-year fixed rate mortgage is in danger.”
The HR 5055 shares some of the of the key reform principles contained in the bipartisan GSE reform legislation by Senate Banking Chairman Tim Johnson and Ranking Member Mike Crapo and approved by the Senate Banking Committee.
“This legislation ensures that new homeowners will continue to have access to the affordable, predictable financing options they need, while protecting taxpayers and our economy from future downturns,” said Congressman Himes. “Our bill combines the market’s efficiency in pricing risk with government's ability to provide scale to create a safer, more liquid housing market that preserves access to affordable housing for American families.”
“Housing finance reform is one of the most important actions Congress can take to protect taxpayers and make our housing finance system stronger and more stable,” said John Dalton, president of the Housing Policy Council, a division of the Financial Services Roundtable. “This bill is additional proof that across the political aisle, key lawmakers in both the House and Senate recognize the need for change in the nation’s housing finance system. We applaud the hard work Reps. Delaney, Carney and Himes have put into their proposal. Congress should take the next step and build on the common elements of this and other reform legislation in the House and Senate to enact permanent reform.”