After months of negotiating and a series of hearings, the Senate Banking Committee announced today that it has reached a bipartisan agreement on a housing finance reform proposal that intends to wind down Fannie Mae and Freddie Mac.
Spearheaded by Committee Chairman Tim Johnson (D-SD) and Ranking Member Mike Crapo (R-ID), the bipartisan reform proposal includes measures from Committee Members of both parties, the Administration and stakeholders.
“There is near unanimous agreement that our current housing finance system is not sustainable in the long-term and reform is necessary to help strengthen the economy,” said Chairman Johnson in a statement. “This bipartisan effort will provide the market the certainty it needs, while preserving fair and affordable housing throughout the country.”
A key principle included in the proposal involves protecting taxpayers from bearing the cost of a housing downturn by winding down government-sponsored enterprises Fannie Mae and Freddie Mac, which would invite the return of private capital to the housing finance market.
Other key facets include ensuring that affordable, 30-year fixed-rate, prepayable mortgages continue to be available; provide equal access for lenders of all sizes to the secondary market; as well as facilitate board availability of mortgage credit for all eligible borrowers.
Reverse mortgages appear to be protected against any further reforms to the Home Equity Conversion Mortgage (HECM), as the proposal from Congressmen Johnson and Crapo does not include language regarding reform of the Federal Housing Administration.
Chairman Johnson and Ranking Member Crapo are currently in the midst of putting finishing touches on draft legislative text that they plan to release publicly in the coming days. The two congressmen also plan to hold a markup in the coming weeks.
“This agreement moves us closer to ending the five-year status quo and beginning the wind down of Fannie and Freddie while protecting taxpayers with strong private capital, building the components for a stable secondary market and avoiding repeating the mistakes of the past,” said Ranking Member Crapo in a statement. “Government control of Fannie and Freddie with on private capital to protect taxpayers against losses is unacceptable.”
Written by Jason Oliva