Lawmakers propose PATH Act to create housing sustainability
Representatives on the House Financial Services Committee announced the Protecting American Taxpayers and Homeowners (PATH) Act on Thursday to create a sustainable housing finance system.
The proposal ends the taxpayer-funded bailout of Fannie Mae and Freddie Mac while phasing out the enterprises within five years.
Additionally, the legislation increases competition by ending the federal government’s domination of the mortgage finance system and also gives consumers more options in determining which mortgage product best suits their needs.
On July 18, the Financial Services Committee will meet to hold a hearing on the newly proposed PATH Act.
Financial Services Committee Chairman Jeb Hensarling (R-TX) is spearheading the bill. Other committee members supporting the proposed bill include Scott Garrett, R-NJ, Randy Neugebauer, R-TX, and Shelley Moore Capito, R-WV.
"America needs a housing policy designed for homeowners and taxpayers – not for Wall Street and the housing industry. America needs a housing policy designed to give every American who works hard and plays by the rules both opportunities and choices to buy a home they can actually afford to keep," Hensarling said.
He added, "Our plan helps taxpayers and homeowners. It gives power and control back to consumers."
The legislation also encourages greater borrower equity by increasing the Federal Housing Administration’s minimum down payment requirement from 3.5% to 5% for all non-first-time borrowers.
Furthermore, the proposal also wants to establish a credit risk-sharing program between FHA and the private sector covering at least 10% of the agency’s new business each year.
The drafted bill also includes provision sought by credit unions to address shortcomings of mortgage-related rules issued by Consumer Financial Protection Bureau, including changes to the definition of ‘points and fee’s under the ability-to-repay rule.
The National Association of Federal Credit Unions appreciates the PATH ACT and believes the legislation is an important part of the housing finance reform debate.
"NAFCU lauds Chairman Hensarling for including these important provisions in his package and looks forward to providing additional feedback on these much needed reforms as the committee continues to look for common-sense ways to cut down on the ever-increasing regulatory burden credit unions face," said NAFCU president and CEO Fred Becker.
However, some policymakers are not weary of the housing finance reform proposal.
Congresswoman Maxine Waters, D-Calif., pointed out that the proposal eliminates the 30-year fixed-rate mortgage, which will put future generations of homeowners at risk to the type of "high interest, balloon-payment mortgages that caused the financial crisis."
"I am strongly disappointed in the Chairman’s legislation, which is little more than an attempt to reinvent America’s housing finance system using the same kind of right-wing ideology that has eroded America’s middle class for decades," Waters explained.
She concluded, "This is by no means a bipartisan bill. By presenting such an extreme proposal—with no input from Democrats—the Chairman stands in stark contrast with his colleagues in the Senate and has made it clear that bipartisan housing finance reform is not his priority."