Debate is intensifying over the Protecting American Taxpayers and Homeowners (PATH) Act, which supporters portray as a path toward a healthier housing market, and critics portray as the highway to mortgage hell.
The PATH Act would phase out Fannie Mae and Freddie Mac over five years and require that the FHA play a substantially reduced role in the mortgage market. After hearing testimony on the bill last week, the House Financial Services Committee will meet again Tuesday to consider and begin voting on it.
“The PATH Act increases competition, enhances transparency and maximizes consumer choice,” said Rep. Randy Neugebarger, a Texas Republican who helped draft the legislation. The act will “ensure our housing markets are healthy, strong and stable,” he said in a statement.
Critics say the act would have devastating consequences for the mortgage and housing industries. If fully implemented, the PATH Act would “lead to significantly higher mortgage rates, particularly in tough economic times, and would put 30-year fixed rate mortgage loans out of reach for most Americans,” said Mark Zandi, chief economist for Moody’s Analytics, testifying before the committee.
The housing-finance system needs reform, Zandi said, but any successful approach will balance the roles of the private market and federal government. The PATH Act doesn’t strike a proper balance, he said, adding that the “housing finance system it envisages is largely privatized, providing no government backstop under any economic circumstances.”
Committee Chairman Jeb Hensarling, a Texas Republican, said in statement that the bill would end government domination of the housing-finance market, give consumers more choices and ensure that taxpayers “never again have to bail out corrupt government-sponsored enterprises like Fannie Mae and Freddie Mac.”