It’s past time for our new Congress to take reform of the mortgage finance system, particularly the role of Fannie Mae and Freddie Mac. Inaction means:
- Homebuyers, especially first-time and low-wealth homebuyers, struggle to obtain financing
- Multifamily housing producers lack clarity about future availability of capital
- Fannie Mae and Freddie Mac operate without a long-term plan while in-house expertise migrates elsewhere
- Private capital remains mostly on the sidelines, waiting for clarity before reentering the market
- Government-backed sources dominate the market under the triage structures erected during the financial crisis
Four senators have just introduced the Jumpstart GSE Reform Act to
move Congress in the right direction. Senators Elizabeth Warren (MA), Bob Corker (TN), David Vitter (LA) and Mark Warner (VA) have sponsored the bipartisan measure to prohibit Congress from using the GSE’s guarantee fees as a revenue source. The guarantee fees charged by Fannie and Freddie have been an all-too tempting target, but using them to fund other initiatives only harms still-recovering housing markets and makes it even harder to complete GSE reform by creating budgetary consequences to restructuring. The bill also would prohibit the Treasury Secretary from disposing of the government’s senior preferred stock in Fannie and Freddie without new legislative authority.
This is the second bipartisan prod on mortgage finance reform this month—the Bipartisan Policy Center’s Housing Commission released a report in February explaining a proposal for an explicit, limited government role implemented by a public guarantor that would replace many of the functions currently handled by Fannie Mae and Freddie Mac. NHC welcomed the BPC report and the renewed focus it brings to the critical issue of mortgage finance reform. Housing challenges cut across partisan, geographic, and economic divisions in this country. Lawmakers and housing experts are reaching across the aisle to chart a path forward. It is time for action on mortgage finance reform.