Senate Banking Committee close to decision on Fannie, Freddie reforms

Freddie Mac and Fannie MaeSenate Banking Committee members Bob Corker (R-Tenn.) and Mark Warner (D-Va.) recently said the committee is close to a decision on how to proceed with reforms to Fannie Mae and Freddie Mac.

Corker and Warner introduced legislation last summer that would replace government-sponsored enterprises Fannie and Freddie and transfer the GSEs’ functions to the Federal Mortgage Insurance Corp., which would be modeled after the FDIC to provide reinsurance behind 10 percent first-loss private capital.

During a discussion of the Financial Services Roundtable held last week, Corker and Warner said their bill has a strong chance of passing, pointing to bipartisan support for the measure—the bill has five Democratic and five Republican co-sponsors, all of whom are members of the Senate Banking Committee.

The legislation has been well-received by both the Credit Union National Association and National Association of Federal Credit Unions, however, the groups suggested changes to the bill in November testimony before the committee.

NAFCU witness John Harwell said that if the committee proceeds with the Corker-Warner approach, participation in a newly created entity must generate enough volume to ensure liquidity for credit unions.

CUNA Senior Vice President and Chief Economist Bill Hampel told the committee that while the legislation “corrects the fatal design flaws of the previous system,” improvements are necessary “for it to work for small lenders.”

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