Sens. Bob Corker (R-Tenn.) and Mark Warner (D-Va.) introduced a housing reform bill, the Housing Finance Reform and Taxpayer Protection Act, that would liquidate Fannie Mae and Freddie Mac and replace them with a private market for securitizing mortgages and a new government agency as a backstop.
The bill attracted six additional co-sponsors initially, three Democrats and three Republicans. It would create a new agency, the Federal Mortgage Insurance Corporation, to provide liquidity in the mortgage market by securitizing mortgages. To protect taxpayers, investors who buy FMIC-issued securities would bear first risk of loss and hold 10 percent capital against risk.
The legislation would require Fannie and Freddie to be dissolved and wound down as quickly as possible, and the authority of their overseeing agency would be passed to FMIC. The bill also creates an affordable housing fund paid for by an FMIC user fee.
In response to the bill, Senate Banking Committee Chairman Tim Johnson (D-SD) released the following statement:
“I thank Senators Corker and Warner for furthering the discussion and debate surrounding housing finance reform with this proposal,” said Chairman Johnson. “Reforming the nation’s housing finance system is critical to the long-term health and stability of the American economy, and Ranking Member Crapo and I plan to turn the Committee’s attention to broader housing finance reform after we address the more timely issue of FHA solvency. Ranking Member Crapo and I agree that any reform effort that moves through the Banking Committee must be bipartisan and include ideas and input from all members of the Committee.”
Read a bill summary.
Read the bill text.