Senate Banking Committee leaders Sens. Tim Johnson (D-S.D.) and Mike Crapo (R-Idaho) have said they are putting the finishing touches on bipartisan legislation to wind down Fannie Mae and Freddie Mac. While the bill would wind back government support of the mortgage industry, it would not see the end of government guarantees.
Under the plan, the private sector would shoulder the first 10 percent of any mortgage losses, with an emergency government guarantee kicking in after that, Reuters reported.
The effort has been praised in Washington and by the mortgage industry. NAHB chairman Kevin Kelly said the plan would continue to ensure access to housing credit.
"The plan would provide a federal backstop to ensure that the 30-year mortgage, the bedrock housing finance tool for most consumers, remains readily accessible and affordable. The proposal also includes many elements advocated by NAHB that will boost private capital in the marketplace and ensure a reliable and adequate flow of liquidity for single-family and multifamily housing," Kelly said.
House Financial Services Committee chairman Jeb Hensarling (R-TX) also praised the legislation, but touted the FHA
reforms from his PATH Act.
“Since we cannot have true sustainable housing finance reform without FHA
reform, the PATH Act also includes needed FHA
reforms. Therefore, I am also skeptical of any housing finance reform plan that fails to include FHA
reform. Without the FHA
reforms found in the PATH Act, all you’re probably doing is simply squeezing one side of a balloon only to have it bulge out on another."
The bill deciding the future of Fannie Mae and Freddie Mac is due within days, and has been hailed as a bipartisan agreement.