Representatives from both sides of the aisle on the House Financial Services Committee took to their soapboxes Tuesday, defending and/or combating the proposed Protecting American Taxpayers and Homeowners (PATH) Act, with the ultimate goal in mind to end the status quo of having too much government in housing.

The legislation proposes an end to the taxpayer-funded bailout of Fannie Mae and Freddie Mac, while phasing out the enterprises within five years. Additionally, the bill wants to increase competition by ending the enterprises’ monopoly over the mortgage finance system. 

However, Democrats from the committee combated the bill, signaling that the proposal eliminates the 30-year fixed-rate mortgage, which they fear could hinder taxpayers from experiencing the American Dream of homeownership.

"The reason the 30-year fixed-rate mortgage exists today is because we rescued Freddie Mac and Fannie Mae after the private entities in the market ran for the exits and took trillions of dollars," cautioned Rep. Stephen Lynch, D-Mass.

He added, "The private-label securitization market dropped to zero in the midst of the crisis. The bill proposes a fully privatized mortgage market, which is dangerous and could cause damage to the housing market."

However, Republicans combated the criticism, stating that the proposed legislation allows for the continued use of a 30-year fixed-rate mortgage through the creation of a liquid qualified securitization market.

Under such a market, the traditional and bulk of the mortgage market would be standardized and new pools of mortgages would be formed based on credit characteristics of such mortgages, explained Rep. Scott Garrett, R-NJ.

"With the compromises made in this legislation to preserve the 30-year fixed mortgage, to allow the government to increase its role during times of economic uncertainty, and to ensure access to the platform for financial institutions of all sizes, this bill does a tremendous job of striking the delicate balance between protecting taxpayers and transitioning to a new, more stable housing finance model," Garrett stated.

The continued concern Democrats raised throughout the hearing was the lack of equal input from both sides — an issue that members of the Senate Banking Committee have overcome with the creation of a GSE reform bipartisan bill.

"While I’m appreciative of your holding this markup, I’m disappointed in your lack of doing so behind closed doors and not asking for any Democrat input," explained Maxine Waters, D-Calif.

She continued, "We have a bipartisan housing reform bill in the other chambers of this body. We should strive toward the same outcome."

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