Senate Banking Committee Chairman Mike Crapo (R-ID) introduced an outline for housing finance reform legislation that includes reforms of Fannie Mae and Freddie Mac.
Fannie Mae and Freddie Mac, along with Ginnie Mae, dominate the mortgage market, with more than two-thirds of mortgages backed by the federal government. While these entities are currently earning profits, if the housing market experiences a downturn, taxpayers could again be on the hook for billions of dollars, said Crapo. Fannie and Freddie were placed into conservatorship in 2008, and they remain there, which Crapo says is not sustainable.
“We must expeditiously fix our flawed housing finance system,” Crapo said. “My priorities are to establish stronger levels of taxpayer protection, preserve the 30-year fixed rate mortgage, increase competition among mortgage guarantors, and promote access to affordable housing.”
Crapo’s proposal would create a new housing finance system designed to reduce the systemic risk posed by the current duopoly of mortgage guarantors, increase the role of private risk-bearing capital, and establish new layers of protection between mortgage credit risk and taxpayers, ensure a level playing field for originators of all sizes and types. It would also lock in uniform underwriting standards, and promote broad accessibility to mortgage credit, including in underserved markets.
“We have engaged in a robust process over the past several Congresses on housing finance reform, holding many hearings, briefings, meetings, and negotiations,” Crapo said. “The time is now to resolve this issue, and I look forward to working with my colleagues as we move forward.”
Rep. Patrick McHenry (R-NC), the Republican leader of the House Financial Services Committee, said legislators should responsibly ending the government sponsorship of Fannie Mae and Freddie Mac.
“I am glad to see Chairman Crapo take an important step by outlining his proposed plan and am eager to work with him and Chairwoman Waters to craft meaningful finance reform legislation,” McHenry said. “In a letter to the Chairwoman last month, I called on the House Financial Services Committee to take up this issue and hold a hearing as soon as possible on the role of the federal government in mortgage finance. I strongly agree with Chairman Crapo; the time is now to resolve this issue. I look forward to joining him, and my colleagues across the aisle, in this effort.”