Representatives John Delaney (D-MD), John Carney (D-DE), and Jim Himes (D-CT) introduced a bill that would shift the housing finance market away from Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC), and keeps home ownership attainable for working families by strengthening affordable housing programs.
The new bill, introduced Thursday, July 10th, would also preserve the 30-year fixed rate mortgage and protects American taxpayers by using private sector pricing to reduce the risk of future bailouts.
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Insurance through Ginnie Mae
The house Democrats introduced new GSE reform that would establish an insurance program through Ginnie Mae. The bill also provides that all government guaranteed single-family and multi-family mortgage-backed securities will be supported by a minimum of 5% private sector capital, standing in a first-loss position. The remaining 95% of the risk will be shared between Ginnie Mae and a private reinsurer on a pari passu basis.
Moreover, the bill would wind down Fannie Mae / Federal National Mortgage Association (OTCBB:FNMA)’s and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC)’s current activities and revokes their charter, but allows them to be sold and recapitalized as entities with different business plans without any of their current unique powers.
As reported by us earlier, a bill from the trio of Democratic congressman introduced a new proposal in January that would maintain a government guarantee and hence the 30-year fixed rate mortgage and other affordable housing options, by restructuring Ginnie Mae, which is wholly owned by the government and focuses on providing affordable housing to low and moderate income households through a guarantee for mortgage lenders.
Growing number of proposals for Fannie Mae, Freddie Mac reform
Several bills have been introduced to restructure or eliminate the two GSEs over the last few months, reflecting considerable momentum to resolve what is seen as one of the last remnants of the crisis. Recent Fannie.Freddie-related legislation includes the Corker-Warner GSE Reform bill and another bill by Republicans in the House of Representatives, led by Jeb Hensarling of Texas.
We also published a timeline of political factors impacting the two GSEs yesterday.
According to the new Delaney-Carney-Himes bill, Fannie Mae / Federal National Mortgage Association (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) will be wound down over a five-year period. Their government guarantee and charter will be removed and they will repay the government with interest for the government’s investment in the institutions. The repayment must take into account both the injection of capital and the overall exposure to the government.