The Senate is currently formulating its bipartisan
plan to overhaul Fannie
Mae
and Freddie Mac
in the Committee
on Banking, Housing, and Urban Affairs. Chairman Tim Johnson
(D-SD) and Ranking Member Mike
Crapo (R-ID) have been working together to craft
legislation that shifts the mortgage market to the private sector and creates
the Federal Mortgage Insurance Corporation (FMIC) that will protect taxpayers
from having to bear the costs if another housing bubble bursts in the future. FMIC
will be an independent agency that supervises servicers and guarantors and
provides insurance on mortgaged-backed securities. It will also create a
mortgage insurance fund that funds insurance claims but only after the private
sector absorbs the initial risk. The government will remain a guarantor of
mortgages as a last resort.
In a news
release, Mike Crapo
explained, “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 and avoiding repeating the mistakes of the past. Government control of
Fannie and Freddie with no private capital to protect taxpayers against losses
is unacceptable.”
This legislation is
only in its early stages, focusing on the necessity of a smooth and efficient
transition to private lending and the continuing availability of the affordable
30-year mortgage. Brokers, change is coming to the mortgage market, and it is essential
that you are knowledgeable every step of the way to a final bill. This
legislation directly affects your occupation and your clients, so keep your eyes
open for more advances in legislation.
