| WASHINGTON, March 11
WASHINGTON, March 11 The leaders of the U.S.
Senate Banking Committee on Tuesday outlined plans for
legislation to wind down government-owned mortgage financiers
Fannie Mae and Freddie Mac that they said
would continue to provide access to long-term, fixed-rate
Committee Chairman Tim Johnson and Senator Mike Crapo, the
panel's top Republican, announced the agreement after working
for months to bridge a partisan divide with the hope of moving
legislation this year.
The officials said they were putting finishing touches on a
bill they planned to release "in the coming days."
"This agreement moves us closer to ending the five-year
status quo and beginning the wind down of Fannie and Freddie,
while protecting taxpayers with strong private capital, building
the components for a stable secondary market," Crapo said in a
The work by Johnson and Crapo builds off a bipartisan
measure previously proposed by Senators Bob Corker of Tennessee
and Mark Warner of Virginia. Threading the needle between
centrist lawmakers, liberal Democrats and conservative
Republicans is a difficult task, and even with heavy involvement
from the Obama administration the leaders missed the mark of
producing a complete bill.
Under their proposal, Fannie Mae and Freddie Mac would be
wound down and replaced with a new government reinsurer. It
would mandate private financiers hold a stake and take at least
10 percent of the first losses on mortgage debt. The government
would only provide assistance after private creditors had taken
Included in the outline is a mandate that strong
underwriting standards be built into the new system. It would
require a 5 percent downpayment for all but first-time buyers,
although that requirement would be phased-in over time. Some
consumer and housing advocates worry that a system with rigid
down payments will prevent less affluent Americans from
accessing credit even if a limited government role is retained.
"There is near unanimous agreement that our current housing
finance system is not sustainable in the long-term and reform is
necessary to help strengthen and stabilize the economy," said
Johnson. "This bipartisan effort will provide the market the
certainty it needs, while preserving fair and affordable housing
throughout the country."
The outline from the two senators said they plan to
"eliminate affordable housing goals" and instead establish
housing-related funds to ensure housing is available for all
types of borrowers and renters.
Any housing reform plan passed by the Democrat-controlled
Senate must also make its way through the Republican-controlled
House before it can be signed into law.
Fannie Mae and Freddie Mac were seized by regulators in 2008
as loan defaults drove them toward insolvency, and taxpayers
have spent $187.5 billion to keep them afloat. By the end of the
month, the duo will have returned $202.9 billion in dividends to
taxpayers for the federal bailout.
Industry experts and political analysts do not expect broad
housing finance reform to happen before the mid-term elections
in November 2014, and probably not until after the next
presidential election in 2016.