The Senate Banking Committee voted 13-9 on Thursday to approve bipartisan housing finance reform legislation sponsored by Sens. Tim Johnson (D-S.D.) and Mike Crapo (R-Idaho) that will now move to the full Senate for consideration.
The legislation provides for the wind-down of government mortgage giants Fannie Mae and Freddie Mac and their replacement with the Federal Mortgage Insurance Corp.
“Today’s vote marks an important milestone,” Crapo said. “For the first time in the nearly six-year conservatorship of Fannie Mae and Freddie Mac, both bodies of Congress have passed legislation to reform our broken housing finance system. I thank everyone for their continued work on this legislation and look forward to further discussions as the process continues.”
Several groups, including the Mortgage Bankers Association (MBA) and National Association of Realtors (NAR), have expressed support for GSE reform.
The National Association of Federal Credit Unions (NAFCU) also lauded the committee’s decision but added that members are concerned about the bill’s potential impact on credit unions.
“We applaud the efforts of Senate Banking Committee Chairman Tim Johnson and Ranking Member Mike Crapo and the members of the Banking Committee in advancing housing finance reform,” NAFCU President and CEO Dan Berger said. “We still have concerns about the bill and its impact on credit unions, including the potential cost of the proposal and whether it would be workable. It is important that any ultimate housing finance reform package work for credit unions and their 97 million members, and we look forward to working with the full Senate to address our concerns should the legislation come to the Senate floor.”
The Credit Union National Association (CUNA) also expressed support for the committee’s decision to refer the legislation to the full Senate.
“It’s critical that government-sponsored enterprise reform ensures equal and competitive access for credit unions and other small lenders to the housing finance market–and avoids further concentration of the primary and secondary mortgage markets to Wall Street and the largest of lenders,” CUNA President and CEO Bill Cheney said. “This legislation takes significant steps toward accomplishing both.”
The Johnson-Crapo bill is just one of several GSE reform measures introduced in Congress, including the approach put forward by Sens. Bob Corker (R-Tenn.) and Mark Warner (D-Va.), Rep. Jeb Hensarling’s (R-Texas) PATH Act and Rep. Maxine Waters’ (D-Calif.) HOME Forward Act.
Following the committee’s markup of the Johnson-Crapo bill, Hensarling released a statement saying the approach was a “wealth redistribution scheme.”
“While there are several commonsense provisions in Senate bill that are similar to those we included in the PATH Act, the Senate bill features a controversial and irresponsible new politicization of mortgage credit insisted by Senate Democrats under the guise of affordable housing,” Hensarling said. “This wealth redistribution scheme, far worse than that of the current system, would be a multi-billion dollar annual invitation to return to the lower credit standards, higher risks, and unsustainable lending that created the  crisis in the first place.”