A bipartisan group of senators issued a bill to extinguish the existing government-sponsored enterprises Fannie Mae and Freddie Mac Tuesday.

The legislation calls for a new government issuer, known as the Federal Mortgage Insurance Corp., which would replace the GSEs.

Sens. Bob Corker, R-Tenn., and Mark Warner, D-Va., are leading a group of eight senators who want to wind down the government-sponsored enterprises within a period of five years.  The draft bill is known as the Housing Finance Reform and Taxpayer Protection Act of 2013.

Mortgage professionals took to their soapboxes Tuesday to discuss the bill's introduction — surprisingly, cheers were heard all around for the senators’ efforts.

Bipartisan Policy Center Housing Commission co-chairs commended the senators for proposing new housing finance legislation, saying they hope such legislation will signal a renewed focus in Congress to repair the mortgage finance system.

"As we approach the fifth anniversary of the government’s takeover of Fannie Mae and Freddie Mac, the government dominates the housing market in a way never seen before in our nation’s history," the co-chairs expressed. 

They added, "Today, the government touches more than 90% of mortgages. This government-dominated status quo is undesirable and unsustainable and exposes taxpayers to unnecessary risk. Recent developments such as rising home prices and the return to profitability by Fannie Mae and Freddie Mac should not lull us into a false sense of complacency." 

The proposed bill incorporates many of the elements of the housing finance reform plan proposed earlier this year by the Bipartisan Policy Center’s Housing Commission. 

Both plans include a new system in which private entities are responsible for the majority of the mortgage system’s functions — not only as originators, but also as issuers of mortgage-backed securities.

"The introduction of this legislation is proof that bipartisan cooperation is possible, even on an issue as complex as housing finance reform," the co-chairs explained.

During a press conference, the eight senators officially announced the bill, noting that even though all of them come from various political backgrounds, they came to the consensus that some type of reform needs to happen immediately.

"The last piece of rebuilding the economy is housing," said Jon Tester, D-MT. "This bill will provide certainty to the housing market."

The American Bankers Association commended the bipartisan group on the introduction of the Housing Finance Reform and Taxpayer Protection Act of 2013 to address the government’s dominant role in the mortgage market. 

"This bi-partisan legislation is a positive first step in what is certain to be a long process toward creating a sustainable, rational and limited role for the federal government in supporting and regulating a mortgage market that is appropriately and predominately filled by the private sector," said Frank Keating, president and CEO of ABA.

He added, "The bill follows principles long advocated by the ABA, and builds upon the framework detailed by the Bipartisan Policy Center’s Housing Commission on which I served." 

During the question-and-answer session of the conference, Warner addressed an audience member’s concern about eliminating Fannie Mae and Freddie Mac completely.

He claims that while some market experts — particularly investors — would like to see the enterprises have initial public offerings on the New York Stock Exchange again, it would still leave taxpayers extremely exposed. 

"It’s a brand new system that puts private capital at risk," Warner said. "I just don’t think incorporating the government is a viable approach."

The Federal Housing Finance Agency welcomes the proposed bill and is committed to working with members of both the Senate and House to move the process forward.

"Fannie Mae and Freddie Mac have been in conservatorship for almost five years and Congressional action is needed to resolve this situation and expand private sector participation in the U.S. housing finance market," the housing agency concluded.

cmlynski@housingwire.com