WASHINGTON (3/12/14)--Housing finance reform got a shot in the arm yesterday. After five years of debate and delay among policymakers, Senate Banking Committee Chairman Tim Johnson (D-S.D.) and the committee's top Republican member, Sen. Mike Crapo (Idaho), announced Tuesday that they have agreed upon a bipartisan plan to overhaul the housing finance market, as well as to wind down government-owned Fannie Mae and Freddie Mac.
The Credit Union National Association has and will continue to advocate for credit unions as housing reform moves forward.
CUNA has repeatedly said that credit unions appreciate the need to reform the current housing finance system, but any reforms must not hinder the ability of credit unions to meet their members' housing finance needs in a member-friendly cooperative way.
CUNA Senior Vice President of Legislative Affairs Ryan Donovan said that, based on early information, the Johnson-Crapo initiative seems to include many of the housing finance reform suggestions CUNA made during testimony last year.
"We look forward to reviewing the legislative text when it is made available and are hopeful this will be a bill that credit unions can strongly support," Donovan stated.
A draft bill could be unveiled in the next few days, with a committee vote to follow in the next weeks. Information released by Johnson and Crapo indicated the legislation will reflect significant provisions of S. 1217, a bill introduced by Sens. Bob Corker (R-Tenn.) and Mark Warner (D-Va.) last June.
Like that legislation, the new bill would wind down government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac and replace them with a new mortgage guarantor, the Federal Mortgage Insurance Corporation (FMIC).
The winding down of Fannie and Freddie, and the Federal Housing Finance Agency, would be accomplished within five years of the bill's potential passage. GSE assets would be sold off, and their charters would be revoked once the FMIC is established.
Under the terms of the bill, private entities would purchase mortgages from lenders. Those mortgages would then be reissued as securities and sold on to investors. Investors would need to maintain a 10% interest of equity for every dollar of risk.
New loans would not be required to go through the FMIC. Only those that wanted the government guarantee would be processed by the agency.
"This bipartisan effort will provide the market the certainty it needs, while preserving fair and affordable housing throughout the country," Johnson said in a statement. "I look forward to moving this effort through committee once members have had a chance to review our forthcoming legislation."
CUNA's Donovan said, "We appreciate that the committee engaged CUNA frequently through the development of this legislations, and we look forward to its consideration in the Banking Committee very soon."