New Fannie/Freddie Wind-Down Bill Moves to Preserve the American Dream
John Dalton is the President of the Housing Policy Council
Reforming our nation’s housing finance system is critical to preserving the American Dream of homeownership and elements like the 30-year fixed rate mortgage that give Americans the chance to buy a home.
Representatives John Delaney (D-MD), John Carney (D-DE), and Jim Himes (D-CT) have made an important contribution to that debate with the introduction of their new bill, “The Partnership to Strengthen Homeownership”. The release of their proposal is especially significant because it shares a number of the elements necessary for successful bipartisan reform. The bill is also significant because it is a collaboration by three respected Democrats who serve on the House Financial Services Committee.
The Housing Policy Council, a division of FSR, believes that this bill is additional proof that key members of both parties in the House and Senate recognize the need for housing finance and GSE reform. We believe that there continues to be an opportunity to find common ground on housing finance reform legislation and the Delaney-Carney-Himes bill helps move the conversation forward.
The Delaney-Carney-Himes bill makes positive contributions in a number of areas of the complex issue of GSE reform:
• The bill recognizes that a new housing finance system is needed and envisions Ginnie Mae as the central entity which would apply the government guarantee.
• It would require private capital to take the first loss in a new system.
• It would wind down the GSEs over five years and replace Fannie and Freddie with a new system, although the GSEs can act as an aggregator for small lenders.
• It would provide a defined government backstop role to ensure liquidity for stable mortgages.
• It would preserve the TBA mortgage securities market which is essential for consumers to have access to mortgage credit.
• It addresses issues like affordable housing and market access for all mortgage market participants.
Like other significant reform proposals, the bill is not perfect and additional work needs to be done. The details of the mechanics and regulation of a new system need careful development. For example, there are issues regarding the proper regulation of lenders and other market participants without regulatory duplication or overlap, as well as structure of a Ginnie Mae delivery system for the MBS.
HPC views the Delaney-Carney-Himes legislation as a positive contribution to the debate in the House. We are committed to working with the bill sponsors, and the leaders of the House Financial Services Committee, to produce strong bipartisan reform legislation that can become law and establish a strong stable housing finance system that can serve homebuyers for decades to come.