WASHINGTON (6/26/13)--Tuesday's introduction of legislation that 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), "is an important first step to creating a secondary mortgage market that focuses on ensuring access to all financial institutions in need a functioning mortgage market, including credit unions," Credit Union National Association President/CEO Bill Cheney said.
The bill, known as the Housing Finance Reform and Taxpayer Protection Act, was introduced by Sens. Bob Corker (R-Tenn.), Mark Warner (D-Va.), Mike Johanns (R-Neb.), Jon Tester (D-Mont.), Dean Heller (R-Nev.), Heidi Heitkamp (D-N.D.), Jerry Moran (R-Kan.) and Kay Hagan (D-N.C.).
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.
Sen. Warner in a release said the FMIC "replaces the failed 'housing goals' of the past with a transparent and accountable market access fund that focuses on ensuring there is sufficient affordable housing available for lower and middle-income buyers." The fund would not be paid for with taxpayer funds, but rather through a small FMIC user fee that only those who choose to use the system would pay, the Warner release added.
The bill would ensure that credit unions and other small institutions have direct access to the secondary market. CUNA has repeatedly said that any changes to secondary mortgage market structure must allow credit unions and other small issuers to maintain full and unrestricted access to that market. CUNA has also highlighted the importance of preserving 30-year, fixed-rate mortgages and ensuring that the secondary market is strong enough to weather economic adversity.
Cheney in a release thanked the senators for introducing the bill, and for fully considering credit union concerns as it was developed. "We recognize that the legislative process of housing finance reform will be a considerable effort, and credit unions are ready to work with lawmakers to enact changes that will ensure that smaller institutions continue to have fair and affordable access to a vibrant, well-regulated and affordable housing market," Cheney added.
For more on the bill, use the resource link.