The housing reform bill that will wind down and eliminate Fannie Mae and Freddie Mac will finally see a vote from the full Senate after months of hearings and an indefinite hold last month.
The Housing Finance Reform and Taxpayer Protection Act of 2013 (S.1217)—or the Johnson-Crapo bill as it is colloquially known—Thursday passed the Senate Committee on Banking, Housing and Urban Affairs by bipartisan a vote of 13-9 and is now headed for a full Senate vote.
Sponsored by Senators Tim Johnson (D-S.D.) and Mike Crapo (R-ID), the bill aims to stabilize and create greater competition in the housing finance market by winding down and eliminating government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac.
“Today’s vote marks an important milestone,” stated Crapo, ranking member of the Senate Banking Committee. “For the first time in the nearly six-year conservatorship of Fannie Mae and Freddie Mac, both bodies of Congress have passed legislation to reform our broken housing finance system.”
The bill, which intends to encourage the return of private investors to replace the functions of the GSEs, aims to create a new system that will be regulated by the Federal Mortgage Insurance Corporation, modeled in part after the Federal Deposit Insurance Corporation (FDIC).
The new system establishes a type of mortgage-backed security with an explicit government backstop and 10% first loss private secondary-market capital to absorb losses and protect taxpayers from another bailout through the creation of a reinsurance fund, known as the Mortgage Insurance Fund.
“After the housing crisis we experienced, real reform is clearly necessary to stabilize the housing system and renew the faith in the American dream of homeownership for generations to come,” stated Committee Chairman Johnson.
Opponents to the GSE reform bill argue that the legislation does not do enough for the middle class, while others expect the bill may be dead on arrival.
Before Thursday’s vote, the bill was put on an indefinite hold last month as sponsors tried to get more support following a two-week recess.
Johnson-Crapo is just one of four measures included in the bill. Other measures include the House’s PATH Act and HOME Forward Act, and the Senate’s Corker-Warner bill.
“Even though the support was not unanimous, every member on the Committee was actively engaged in this collaborative process, and passing this legislation out of committee is only the first step,” stated Johnson. “I look forward to continue working with my colleagues to keep this important process moving forward.”
Written by Jason Oliva