New Democrat Coalition unveils housing finance reform priorities
The New Democrat Coalition wants to wind down Fannie Mae and Freddie Mac and increase private-sector involvement in the residential mortgage market, according to a new document the group released Friday. The proposal includes preserving access to affordable loans, including the 30-year, fixed-rate loan, and strengthening taxpayer protections. The NDC is a 43-member strong coalition of Democrats in Congress whose financial services task force is led by Reps. Jim Himes (D-Conn.) and Gary Peters (D-Mich.) Its proposals are meant to serve as a set of guiding principals for the coalition on housing finance reform. The federal government would maintain a limited role to provide oversight, protect taxpayers against losses and ensure continued access to safe and affordable mortgage products, like traditional 30-year, fixed-rate home loans, according to the New Dem plan. "The New Dems' principles are responsible reforms that, over time, shift the onus from the federal government to the private marketplace, while ensuring strong government oversight and consumer protections," said NDC Chairman Rep. Joseph Crowley (D-N.Y.). The NDC said it wants the Fannie/Freddie "hybrid model of privatized gains and subsidized losses" eliminated and the reliance on government-backed loans reduced. It said the use of private-sector mechanisms to reduce risk should be encouraged, but did not give further details. The coalition said any government guarantee "should cover only the securities themselves, which should be based on fundamentally sound mortgages with strong underwriting standards, not the issuing entity. Companies issuing securities products must be subject to a strong and independent regulator that ensures the companies are well capitalized and capable of withstanding deep losses." Other guiding principals include accurately price risk; encouraging greater competition and deep liquidity; requiring sound underwriting; and limiting activity via a strong and independent regulator that narrowly charters "the activities of issuers to limit these companies from engaging in activity that is inconsistent with preserving the accessibility of traditional mortgage products." The coalition also said the government-sponsored enterprises are an important source of financing for the multifamily housing industry, and as such, that housing finance reform should not reduce the availability of multifamily mortgage credit. "We need a housing finance system that preserves the American dream of homeownership and preserves access to affordable mortgages for middle class families. However, we also need reforms that reduce the risk to taxpayers and that create conditions for the private sector to play a larger role in the secondary mortgage market," Peters said. Write to Kerry Curry. Follow her on Twitter @communicatorKLC.