Three New England congressmen have introduced legislation designed to protect the fixed-rate 30-year mortgage and, they say, shield American taxpayers from future bailouts by reforming the housing finance system.

The Delaney-Carney-Himes bill, called the “Partnership to Strengthen Homeownership” would wind down Fannie Mae and Freddie Mac and replace them with a new system based on private capital. 

Currently, the GSEs are fully under the control of the federal government and American taxpayers are 100% financially responsible should the housing market experience a significant downturn and cause Fannie Mae and Freddie Mac to need additional support.

David Stevens, President and CEO of the Mortgage Bankers Association, said he thinks the bill is a good one for the industry.

“This legislation is a constructive proposal that will help move the ongoing housing finance reform debate forward. MBA appreciates the chance to have been part of the stakeholder dialogue leading up to the bill’s introduction, and we are pleased that it furthers our primary objectives of ensuring liquidity for all forms of housing while reducing taxpayer risk,” Stevens said. “We particularly appreciate the bill’s approach regarding the appropriate level of private ‘first-loss’ capital required, its mechanisms for the pricing of a federal guarantee, and its recognition of the unique attributes and importance of the multifamily finance market. We look forward to working with the bill’s authors to help them further assess the expanded role envisioned for Ginnie Mae in order to ensure a ‘level playing’ field in both the residential market and the multifamily rental housing market.

“Furthermore, MBA believes the proposal will complement ongoing efforts by the Federal Housing Finance Agency to strengthen the secondary mortgage market.  MBA is eager to continue engaging with the leadership of the House Financial Services Committee, the bill’s authors, and other key stakeholders, to advance legislative efforts to reform the government sponsored enterprises and further stabilize the housing finance system for consumers,” Stevens said.

The Financial Services Roundtable commended the reintroduction of housing finance reform legislation by Reps. John Delaney, John Carney and Jim Himes today as a positive step toward protecting the American taxpayers and replacing Fannie Mae and Freddie Mac.

“Housing finance reform legislation is essential for protecting taxpayers and making our housing finance system stronger and more stable to serve American homebuyers for the future,” said FSR’s Housing Policy Council President John Dalton. “This bill shows there are thoughtful members on both sides of the aisle who recognize the need for change. We applaud the hard work Reps. Delaney, Carney and Himes have put into their proposal and urge Congress to develop the common ground in this and other proposals and enact permanent reform.”

The bill would mitigate that costly risk to the American people by enabling private participants to take the first loss position and allow the private market to price the risk.

It would also provide a last-resort government backstop to ensure credit is available to preserve the 30-year fixed rate mortgage, a key building block of American homeownership.

The Delaney-Carney-Himes bill shares some of the of the key housing reform principles that advanced successfully in Congress in 2014. FSR and HPC remain ready to work with the sponsors of this bill and other congressional leaders to produce strong bipartisan housing finance reform legislation that can be signed into law.

“Without access to quality affordable housing, there’s no American Dream for millions of middle class families,” said Rep. John Delaney, D-Maryland. “I’m proud to work with Congressman Himes and Congressman Carney on legislation that keeps the fixed-rate thirty-year mortgage alive and preserves a government guarantee while introducing greater fiscal responsibility and stability to the housing finance system. The financial crisis and the bailout of Fannie Mae and Freddie Mac made it clear that we need reform to protect taxpayers.

"The Partnership to Strengthen Homeownership takes the best ideas from both parties to create a 21st century housing finance system that combines the strengths of the private sector and the public sector. Housing finance reform is too important for us to ignore and I look forward to working with my colleagues in both parties in moving this legislation forward,” he said.