A plan to restructure the secondary mortgage market has emerged from the United States Senate Committee on Banking, Housing and Urban Affairs. Banking committee chairman Tim Johnson, D-S.D., and ranking member Mike Crapo, R-Idaho, say their plan includes a government guarantee for mortgages, but only after private investors take the first losses, reports the New York Times.
The plan would set up a new federal regulator – the Federal Mortgage Insurance Corporation. The aim is to shift more mortgage finance risk from the government to the private sector.
“There is near unanimous agreement that our current housing finance system is not sustainable in the long term and reform is necessary to help strengthen and stabilize the economy,” Johnson said in a public statement. “This bipartisan effort will provide the market the certainty it needs, while preserving fair and affordable housing throughout the country.”
The White House announced that it welcomes the bipartisan proposal. President Barack Obama has been urging Congress to restructure Fannie Mae and Freddie Mac.
The National Association of REALTORS® also welcomes the proposal from senators Johnson and Crapo to restructure the secondary mortgage finance system. “There are many aspects of the proposal that mirror NAR’s long-standing principles for restructuring the secondary mortgage market and encouraging the return of private capital,” says NAR President Steve Brown. “Any restructuring of the secondary mortgage market must ensure a reliable and affordable source of mortgage capital for consumers, in all types of markets.”
The legislation is still in the draft phase. Once released, the banking committee will schedule hearings and schedule a vote. If approved, it would then go before the full Senate.