A California Republican and New York Democrat want to reform the secondary mortgage market by creating one federal entity that provides liquidity while maintaining a limited role for the government. Reps. Gary Miller (R.-Calif.) and Carolyn McCarthy (D.-N.Y.) proposed the bill, which calls for the creation of a single government entity and liquidation of Fannie Mae and Freddie Mac. "The purpose of the Facility shall be to ensure that capital for residential mortgages is available to qualified homebuyers throughout the United States, without regard to region, area, or other geographic location," the bill states Their proposed bill, H.R. 2413, recommends establishing a federal secondary market facility for residential mortgages that is financed by private capital. Unlike the government-sponsored enterprises, this proposed entity would have no shareholders, yet could provide liquidity to the market by acquiring and selling mortgage-backed bonds. "Unlike the GSE structure, where profits flowed to shareholders, all facility profits will go to the Treasury," said Miller. "While the government will profit from the Facility created in this bill, no taxpayer dollars will go to the Facility’s operation." The National Association of Realtors came out in support of the bill this week, saying it's in the best interest of taxpayers. "We applaud the efforts of Reps. Miller and McCarthy to create a structure that opens the door to lenders of all sizes without favoring large lenders over small and mid-sized institutions," NAR President Ron Phipps said. "Other hybrid proposals with private profits and government guarantees would only replicate the same incentive structure and mistakes of Fannie Mae and Freddie Mac before the government takeover." In May, Freddie Mac Chief Executive Officer Charles 'Ed' Haldeman said some type of government backstop to shore up liquidity in times of crisis is needed to get private capital back into the mortgage finance market. Other market participants believe the big four banks are the entities most likely capable of filling the capital hole left behind as the GSEs slowly wind down their massive domination of the mortgage finance markets. Write to Kerri Panchuk.