House Financial Services Committee Ranking Member Maxine Waters (D-Calif.) yesterday unveiled a proposal to reform the housing finance system and determine the fate of the housing GSEs. Waters’ plan would wind down Fannie Mae and Freddie Mac over five years and replace them with a lender-owned cooperative to issue government-guaranteed mortgage securities and would establish a new secondary market oversight agency.
Under Waters’ plan, the government guarantee would be explicit and paid for by fees, and private capital would cover the first losses on the cooperative-issued securities. The plan would facilitate community bank access to the secondary market by giving them participation in the cooperative’s governance, and it would provide multifamily financing through an additional platform of the cooperative.
The new regulator would set underwriting standards for the mortgages bought by the cooperative, although Waters’ proposal envisions a minimum down payment of 5 percent, or 3.5 percent for first-time homebuyers. The regulator would be required to ensure broad market access, including for affordable rental housing.
Waters’ proposal has several similarities to the Johnson-Crapo plan currently under consideration in the Senate Banking Committee, although the Senate bill employs a common securitization platform accessed by multiple guarantors, rather than a single cooperative. In Waters’ use of a government guarantee, her plan stands in contrast to the PATH Act -- passed by the Financial Services Committee last year -- championed by Chairman Jeb Hensarling (R-Texas).
Read a summary of Waters’ proposal.