Four Senators are crossing party lines to propose a GSE reform bill that would prevent the government from using guarantee-fee hikes at Fannie Mae and Freddie Mac to cover other spending initiatives.
The proposed legislation also would prohibit the sale of GSE-preferred shares owned by the Treasury without congressional approval and the completion of GSE reform first.
The bill, titled ‘Jumpstart GSE Reform Act,' pulled in four well-known sponsors: CFPB architect and U.S. Sen. Elizabeth Warren, D-Mass.; Republican Sens. Bob Corker, R-Tenn., and David Vitter, R-La.; as well as Sen. Mark Warner, D-Va.
The initiative shows two of the more vocal housing critics — Sens. Warren and Corker — finding consensus on GSE reform across the aisle and taking a major step in trying to curb 'the status quo' at Fannie Mae and Freddie Mac.
While Warren and Corker are ideologically on different sides of the political spectrum, both Senators have made housing reform a key part of their public platforms.
"It has been nearly five years since the financial crisis, and it is past time to reform Fannie and Freddie. That means removing the obstacles and starting a bipartisan effort to take on housing finance reform this Congress," said Sen. Warren. "I am pleased to have the opportunity to work with Senators Corker, Warner, and Vitter, and I look forward to collaborating with them and other Senators in the months ahead on this important issue."
If Congress uses g-fee hikes to fund other programs, it will eventually become impossible to reform the GSEs—an initiative that has bipartisan support, Sen. Corker pointed out.
In late 2012, the Mortgage Bankers Association raised a red flag when a proposal out of Congress suggested using a g-fee hike to cover costs from a future immigrant visa program.
Corker also sees substantial risk if the Treasury sells its preferred GSE shares without Congressional oversight.
"If Treasury were to decide to sell its preferred share investment without Congress having first reformed our housing sector, we would just be returning to a time where gains are for private shareholders and losses are for taxpayers," said Corker.
"Neither of these is an acceptable outcome, so I’m very happy that Senators Warner, Vitter and Warren have joined me in this effort, and I hope Congress will take the necessary steps to ensure housing finance reform can happen as soon as possible," Corker added.
Click here to access the full bill.