Sen. Bob Corker, R-Tenn., is leading a bipartisan group in the hopes of creating legislation that is constructed to reform the housing finance system, particularly winding down both Fannie Mae and Freddie Mac.
Corker’s push on Capitol Hill is a testament to the current sentiment of the government’s dominance in the mortgage market.
"Senator Corker is involved in meaningful conversations with his colleagues to develop a sustainable and pragmatic housing finance model that would finally resolve the GSEs, and he is hopeful that we can deal with this issue in the next few months," said Laura Herzog, a spokesperson from Corker’s office, in a written statement to HousingWire.
Recently, Ed DeMarco, current acting director of the Federal Housing Finance Agency, set a goal to entice investors back into the market by proposing two broad approaches designed to replace both government-sponsored enterprises.
The proposed legislation is expected to build upon the issuer-based approach, which is associated with a financial institution guaranteeing principal and interest repayment to investors.
In this model, the issuer’s guarantee would be backed by shareholders’ capital and would assume a further credit enhancement in the form of a government guarantee on the mortgage-backed securities issued.
In March, the same senators introduced a bill that would prevent the government from using guarantee-fee hikes at both enterprises to cover other spending initiatives.
The bill, titled 'Jumpstart GSE Reform Act,' would also prohibit the sale of GSE-preferred shares owned by the U.S. Department of Treasury without congressional approval from the completion of GSE reform first.
Overall, it seems that policymakers are keen to implement ways that are in line with DeMarco’s vision of ending Fannie Mae and Freddie Mac’s dominance by bringing private capital back into the market.