In recent months Congress and the Obama administration have shifted into higher gear on housing finance reform. During
that time, MBA has testified twice, hosted widely attended House and Senate briefings, and held numerous meetings with key members of the Senate and House, as well as the executive branch, to reinforce MBA’s policy priorities. While Congress is adjourned for its annual August recess, we wanted to be sure you were well aware of the progress on this issue, and give you further insight into how MBA is well-positioned to continue its role as a thought leader on housing finance reform.
As anticipated, several prominent pieces of legislation to overhaul the secondary mortgage market and reform FHA have been introduced, examined in hearings, and gone through markups in committee, while other proposals are still pending. MBA continues to influence the legislative debate, both as an advocate for the industry’s priorities and as a technical resource. MBA has also developed a series of steps that can be taken now, without Congressional action, to ease with the transition to a new end state for the GSEs and pave the way for housing finance reform.
Senate Banking Committee Chairman Tim Johnson (D-SD) and Ranking Member Mike Crapo (R-ID) have signaled they will pivot to consideration of GSE reform legislation later this year. While other Banking Committee members, including Senator Jack Reed (D-RI), continue to refine possible draft reform concepts, in late June Senators Bob Corker (R-TN) and Mark Warner (D-VA) introduced S. 1217, the Housing Finance Reform and Taxpayer Protection Act. This bill, co-sponsored by a bipartisan group of ten Banking Committee Senators, seeks to reform the secondary mortgage market and phase out Fannie Mae and Freddie Mac. Under the legislation, Fannie and Freddie would be liquidated over five years, and replaced with a new FDIC-like agency called the Federal Mortgage Insurance Corporation to provide catastrophic reinsurance for mortgage-backed securities holders. In addition to this explicit government guarantee, private market investors would be required to hold 10 percent equity capital to cover the first losses on loans that default.
In the House of Representatives, Financial Services Committee Chairman Jeb Hensarling (R-TX) introduced H.R. 2767, the Protecting American Taxpayers and Homeowners Act (PATH). In addition to proposing a final resolution to the GSE conservatorships, the bill also addresses important Dodd-Frank Act reforms and the FHA single-family program’s long-term solvency. Among its many provisions, the PATH Act would wind down Fannie Mae and Freddie Mac over a period of five years and replace the companies with a new, non-government public utility to securitize mortgages without a government guarantee. It would establish FHA as an independent agency and make numerous changes to the single-family program, including raising down payment requirements, lowering loan limits, and reducing FHA’s guarantee to 50 percent on single family mortgages. For FHA multifamily housing programs, the PATH Act would introduce income limitations for all FHA insured multifamily mortgages. The bill would also make a number of regulatory changes, including fixing the “points and fees” definition in the Qualified Mortgage rule and delaying its implementation for an additional year, repealing the Dodd-Frank Act’s risk retention requirements and Premium Capture Cash Reserve Account, delaying the implementation of the final Basel III rules pending an economic impact study, and prohibiting Fannie Mae, Freddie Mac, and FHA from doing business in localities that use the power of eminent domain to seize underwater mortgages.
MBA will continue to encourage Congress to ensure that any final bill creates a vibrant, competitive secondary market, includes some level of explicit government guarantee, and works for lenders of all sizes and business models to support both the owner-occupied and the multifamily rental housing markets. We need you to reach out to your members of Congress NOW to weigh in and reinforce our industry’s position.
Please click below to go to the MAA homepage and click on the “Take Action” button to get started. Please note, you will be submitting a letter to the House as well as to the Senate in this particular instance. If you don’t have, or have forgotten your username and password, click on “forgot password” to retrieve it.
