Legislation requiring government-sponsored entities (GSEs) Fannie Mae and Freddie Mac to increase credit risk transfers (CRT) with the private sector was introduced in the House this week by Reps. Ed Royce (R-CA) and Gwen Moore (D-WI).
The Taxpayer Protections and Market Access for Mortgage Finance Act (H.R. 3556) directs the Federal Housing Finance Agency (FHFA) director to establish guidelines requiring Fannie Mae and Freddie Mac to engage in significant, increasing, and varied credit risk transfer (CRT) with an emphasis on front-end transactions when mortgages are originated.
“Increasing private sector involvement in the secondary housing market is the first step in preventing another bailout paid for by American taxpayers,” Royce said. “Congress should direct Fannie and Freddie to increase the amount and the types of credit risk transfer transactions to the maximum level that is economically and commercially viable. This action will stabilize the housing market for decades to come and lays a foundation for future GSE reforms.”
Fannie and Freddie would be required to set and publish guarantee fees, including loan level price adjustments (LLPAs), to reflect the reduced credit risk resulting from new CRT transactions.
“One of the best ways we can help all American families achieve the dream of homeownership is by ensuring their access to housing finance funding,” Moore said. “This bipartisan bill makes such a dream reality by providing guidelines for increased credit risk transfer transactions to make financing home ownership more accessible.”