The movement to eliminate Freddie Mae and Freddie Mac has been gaining momentum over the last few months.
The Johnson-Crapo Bill, written by Senate Banking Committee Chairman Tim Johnson, D-S.D., and Ranking Member Mike Crapo, R-Idaho, the Corker-Warner Bill, written by Senators Mark Warner, D-VA and Bob Corker, R-TN, and the PATH Act, written by Financial Services Committee Chairman Jeb Hensarling, R-TX, all call for the phasing out of Fannie and Freddie.
With the release of GSE reform legislation from Representative Maxine Waters yesterday, there are now four different proposals to wind down Fannie and Freddie and create a new mortgage market structure in the U.S.
The three previous proposals engendered a strong reaction from both sides of the aisle and throughout the mortgage industry.
However, so far, Waters’ proposal was met with a decidedly less fanfare than the others.
Here’s a roundup of those who do have reactions to Waters’ HOME Forward Act:
Senator Johnson supports Waters’ proposal.
“The proposal announced today by Ranking Member Waters is another clear sign that there is momentum building to advance housing finance reform in Congress,” Senator Johnson said in response to Waters’ proposal.
“At first glance, it appears her proposal seeks to strike a balance that can attract broad support from both Democrats and Republicans. Her bill includes many of the same fundamentals we included in the bipartisan Senate legislation – continued availability of the 30-year fixed-rate mortgage, access to the mortgage market for all creditworthy homebuyers, access to affordable housing, strong taxpayer protections, and a strong multifamily housing market. Ranking Member Waters should be commended for furthering the housing finance reform conversation by offering this serious and thoughtful legislation.”
The Independent Community Bankers of America, who offered some criticism of Johnson-Crapo, said that provisions in Waters’ proposal that support continued access for community banks were encouraging.
“Congress must ensure that any reforms to the housing-finance system preserve community bank access to a financially strong, reliable and impartial secondary mortgage market,” Camden Fine, ICBA president and CEO said.
“Ensuring community banks can continue to sell individual loans for cash and retain servicing on those loans is necessary to provide for the continued flow of mortgage credit to consumers nationwide. ICBA looks forward to reviewing the HOME Forward Act and will continue working with Congress and the administration to ensure housing-finance reforms support our nation’s community banking system.”
The National Low Income Housing Coalition noted provisions in Waters’ bill that support The National Housing Trust Fund as a main reason for its support.
“The National Housing Trust Fund will provide block grants to states to be used primarily to build, preserve, rehabilitate, and operate rental housing that is affordable to the lowest income households, including seniors, people with disabilities, and people in the low wage work force,” the NLIHC stated in a release. “It was enacted in 2008, but has not yet been funded.”
Sheila Crowley, president and CEO of the NLIHC added, “Representative Waters has been a stalwart champion of the National Housing Trust Fund for many years.
“She knows how crucial stable, secure housing is for children to succeed in school, for adults to succeed in the workplace, and for seniors and people with disabilities to live with dignity in their communities. We are very grateful that she has provided for decent homes for them in her legislation.”
Investment bank and mortgage market researcher Keefe, Bruyette & Woods noted the “clear message that when Congress actually gets around to replacing the current system, it will most like unwind the GSE’s.”
Despite the proliferation of proposals, KBW analysts think that passage of GSE reform is a “50/50” proposition at best. “The release of the Waters bill does not, in our view, change the dynamics of the mortgage finance debate,” KBW said.
“We still think odds are against a bill being completed this year. Furthermore, we think the farthest legislation might progress is the Johnson-Crapo bill passing through the Senate Banking Committee. We think even a vote on the Senate floor for that bill is less than 50/50.
“In our view, the most likely way that Fannie and Freddie survive is for Congress to do nothing and totally abandon mortgage finance legislation. If this is the outcome, we expect it will be a long painful death for reform legislation because many in Congress will be unwilling to give up the fight. However, if Congress ever proceeds to enacting changes to the mortgage finance market, we think it is clear that Fannie and Freddie will be replaced. Today's release of the Waters bill reinforces our belief in this.”