Mortgage finance reform reaches the starting line

She said the Obama administration welcomes the bipartisan effort and that “we look forward to working with “Senate Banking Committee Chairman Tim Johnson (D-S.D.) and panel ranking member Mike Crapo (R-Idaho), along with “members from both parties in the House and Senate that seek to reform our housing finance system in a bipartisan manner that is consistent with the president’s goals and principles.”

Brundage outlined a view that is similar to what Corker and Warner put forward on Tuesday — replacing Fannie and Freddie with a “new, transparent system in which the private sector plays the central role in the mortgage market and suffers the losses instead of the taxpayer.” 

Obama is aiming to protect 30-year fixed-rate mortgages and ensure that a broad swath of workers of various income levels have access to affordable housing options, principles also expressed by several senators during a Tuesday press conference. 

The White House also took the opportunity to press the Senate to give “swift confirmation” to his nominee Rep. Mel Watt (D-N.C.) to head up the Federal Housing Finance Agency (FHFA), who will appear before the Senate Banking Committee on Thursday. 

Still, banking and housing groups acknowledged that this is the first step in a potentially long process.

“The introduction of this bipartisan bill represents an important step in redefining the government role in housing finance and is a positive framework on which to begin this crucial debate,” said David Stevens, president and chief executive of the Mortgage Bankers Association.

“We realize that this bill is a starting point for the debate, and we are eager to work with the leadership of the Senate Banking Committee, the authors, and other committee members to improve the bill in a way that creates a vibrant secondary market capable that works for lenders of all sizes and business models so they can support both the owner-occupied and the multifamily rental housing markets.

Fannie and Freddie came under government control after the housing crash spurred the financial crisis nearly five years ago. They have received upward of $188 billion in taxpayer help to stay afloat. So far, they have paid the Treasury about $133 billion but it does not count against the taxpayer debt. 

“Housing finance is the last piece of unfinished business remaining after the 2008 economic meltdown,” Warner said. “We have designed thoughtful reforms that will protect taxpayers from future downturns while responsibly preserving the availability of the 30-year fixed-rate mortgage for homebuyers. We believe the housing market is ready for reforms like this, and that the private sector has been waiting for new rules of the road.”

Senate Banking Committee Chairman Tim Johnson (D-S.D.) said the panel would turn its attention to broader housing finance reform after examining “the more timely issue” the solvency of the Federal Housing Administration (FHA). 

That legislation is expected to be done before the August recess, Corker said Tuesday. 

“Reforming the nation’s housing finance system is critical to the long-term health and stability of the American economy,” he said. 

He said he and Crapo “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.” 

Corker said the bipartisan group that crafted the bill are working with the Banking panel’s leaders to build support for the comprehensive legislation.

Currently, Fannie Mae, Freddie Mac and the Federal Housing Administration guarantee or insure more than 90 percent of all home mortgage activity. 

“This bill will advance the debate on GSE reform in an earnest manner,” said NAHB Chairman Rick Judson, a home builder and developer from Charlotte, N.C. 

“As private lenders gradually re-enter the mortgage market, it is essential that the federal government plays a proper role in backing up the nation’s housing finance system to ensure liquidity and stability for homeownership and rental housing,” he said.