A bipartisan bill with a goal of replacing government-sponsored entities Fannie Mae and Freddie Mac was introduced to the Senate on Tuesday.
Senators Bob Corker (R-Tenn.), Mark Warner (D-Va.), Mike Johanns (R-Neb.), Jon Tester (D-Mont.), Dean HEller (R-Nev.), Heidi Heitkamp (D-N.D.), Jerry Moran (R-Kan.), and Kay Hagan (D-N.C.), all members of the Senate Banking, Housing and Urban Affairs Committee, signed onto the legislation that would wind down and replace the GSEs with a privately capitalized system.
“Five years after the financial crisis, it is past time for us to modernize our unstable system of housing finance,” said Corker in a statement. “The framework we’re presenting here will protect taxpayers while maintaining market liquidity, and is the best opportunity we’ll have to finally move beyond the failed GSE model of private gains and public losses.
Fannie and Freddie were taken into federal conservatorship in 2008 and received a $188 billion taxpayer bailout to stay afloat. The senators point to the bailout as the cause for private capital to almost completely disappear from the housing market, making nearly every loan in the U.S. come with a full government guarantee.
The Housing Finance Reform and Taxpayer Protection Act (S. 1217) winds down Fannie, Freddie, and the Federal Housing Finance Agency within five years of bill passage.
The legislation also seeks to create the Federal Mortgage Insurance Company, which would provide catastrophic reinsurance for mortgage-backed securities.
“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, in a statement. “The Corker-Warner bill is a significant milestone and should get policymakers headed in that direction.”
Find out more about the bill.
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