Wednesday, March 12, 2014

Senate Banking reaches agreement on housing finance reform

by Ethan Handelman, National Housing Conference

The Senate Banking Committee announced today that Chairman Tim Johnson (D-S.D.) and Ranking Member Mike Crapo (R-Idaho) have agreed on legislation to reform the housing finance system. The forthcoming bill will be a major step forward toward a housing finance system that repairs the damage done during the crisis and creates a stable system to serve homeowners and renters in America. NHC is pleased to see this bipartisan agreement and welcomes further opportunities for our coalition to work with legislators in the process.

I attended a briefing yesterday by committee staff who shared some details of the proposal. It builds on the framework created in S. 1217, developed by Senators Bob Corker (R-Tenn.) and Mark Warner (D-Va.) that would establish stable, liquid mortgage markets for single-family and multifamily housing with an explicit, paid-for federal guarantee. The bill would create a Federal Mortgage Insurance Corporation to regulate issuance of guaranteed mortgage-backed securities, with private capital absorbing losses ahead of the taxpayer. It also includes many features NHC has advocated for, including:
  • Ensuring the availability of 30-year fixed rate mortgages, including low-downpayment options and a well-functioning TBA market. 
  • Maintaining stable, liquid capital for multifamily housing by maintaining on the existing Fannie Mae DUS and Freddie Mac K-series models. 
  • Establishing an affordability fee to support the National Housing Trust Fund, the Capital Magnet Fund, and a Market Access Fund. 
  • Allowing access by small and regional lenders through a cooperative and via a cash window.
  • Creating an obligation by participants in single-family and multifamily secondary markets to serve all eligible borrowers in all areas and housing types.
Many more details will come once the draft bill is released in coming days. NHC will evaluate the bill against the principles developed by our coalition on housing finance reform and will work closely with legislators as the bill moves to markup in coming weeks.

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