Sens. Bob Corker (R-Tenn.) and Mark Warner (D-Va.) called on Congress to work on reforming the housing finance system, saying the current system “stifles innovation and contributes to stagnation.”
“No one can truly believe our current system of housing finance is acceptable,” the senators said. “The twin ‘government-sponsored enterprises’ Fannie Mae and Freddie Mac have been in a state of legal limbo called ‘conservatorship’ ever since they were bailed out by taxpayers in 2008. The housing market is recovering, yet private sector investment in mortgages is still sidelined due to Fannie and Freddie’s dominance in the market. In 2012, almost eight out of 10 loans made in our country came with an explicit government guarantee from either Fannie or Freddie.”
Warner and Corker have worked with other lawmakers to develop the Housing Finance Reform and Taxpayer Protection Act, which is sponsored by a bipartisan group of lawmakers from the Senate Banking, Housing and Urban Affairs Committee.
“Our bill would bring in a new era of housing finance,” Corker and Warner said. “Mortgage credit would remain available for qualified borrowers, but we would require the private sector to take significant losses before the government acts as a catastrophic backstop. In this capacity, the federal government guarantee remains in place, but in a more limited, responsible form.”
Corker and Warner said the legislation would also help the economy access global capital markets, which helps to keep interest rates low.
“All of this forms the foundation for a stronger housing market and a stronger 21st century economy,” the lawmakers said. “We have had five years to learn the lessons of the financial crisis and have the benefit of half a decade of hindsight. Economists, industry participants, many policy makers, and now the White House agree: now is the time for housing finance reform.”