Republicans on the House Financial Services Committee dismissed President Barack Obama’s call for continued government guarantees in a reformed mortgage system.
In a Wednesday blog post on the committee’s website, House Republicans staked a claim as pioneers on housing finance reform.
“While it’s encouraging that the president is finally engaging in this debate, House Republicans have already taken the lead in moving legislation and consistentlycalledfor housing finance reform in order to protect taxpayers, homeowners, and middle-class families from the devastating impact boom-bust housing cycles have on our economy and the lives of millions of Americans,” the post stated.
Obama supports a Senate bill introduced by Bob Corker (R-Tenn.) and Mark Warner (D-Va.) that would replace Fannie Mae and Freddie Mac with a new government insurer as part of a new mortgage system in which private capital would be required to take at least 10 percent of first losses on mortgage securities before the government stepped in.
House Republicans, however, support the Protecting American Taxpayers and Homeowners (PATH) Act, which passed the Financial Services Committee in July without Democratic support. The PATH Act would essentially privatize home finance entirely, dismantling Fannie and Freddie without providing a replacement.
“It doesn't matter if it's Fannie Mae and Freddie Mac or a new entity that serves a similar function -- if the government is providing that backing it will crowd out the private sector and again put taxpayers on the hook for Washington's failed policies,” the post stated. “That is not reform -- it's the status quo with new packaging.”
Some housing industry leaders, however, say that at least some federal guarantees are necessary for the industry to thrive.
“NAHB applauds President Obama for affirming the importance of maintaining a federal backstop as part of efforts to revamp the housing finance system and protect the 30-year mortgage,” National Association of Home Builders Chairman Rick Judson said in a statement released Tuesday. “This will preserve financial stability, promote investor confidence and limit taxpayer exposure.”
National Association of Realtors President Gary Thomas said he also supports a federal backstop.
“In a fully privatized market, many middle class Americans and individuals on fixed incomes would be unable to access affordable credit or be forced into adjustable-rate mortgages pinned to interest rate variations after a limited term,” Thomas said Tuesday.“These homeowners, faced with potentially dramatic rate increases, could experience payment shocks that rattle their financial stability, which also impacts mortgage markets and the greater economy.”