The U.S. Senate Banking Committee’s Democratic chairman and its top Republican said the panel will advance housing-finance legislation by the end of the year.
“There seems to be more traction toward moving forward with housing finance reform than there has been at any point during the five-year conservatorships of Fannie Mae (FNMA) and Freddie Mac (FMCC),” the Republican, Mike Crapo of Idaho, said at a Senate Banking Committee hearing today.
Crapo said the panel’s goal is to approve a housing-finance bill and send it to the full Senate by the end of the year. Committee Chairman Tim Johnson, a South Dakota Democrat, said the panel is “undertaking this in-depth process with the goal of reaching agreement by the end of the year.”
Today’s hearing begins the Senate panel’s work to write housing finance legislation incorporating ideas from a bill by Senators Bob Corker, a Republican from Tennessee, and Mark Warner, a Democrat from Virginia. At the same time, House Republicans are struggling to find broad support for their plan to set up a floor vote.
“I would like to thank Senators Corker and Warner and the cosponsors of their bill for showing that there is bipartisan support for a government guarantee in a new housing system and willingness to move legislation forward,” Johnson said.
Johnson and Crapo are working on their own bill to replace government-backed Fannie Mae and Freddie Mac by borrowing ideas from the Corker-Warner bill. The Corker-Warner housing bill includes a government backstop in times of crisis while House Republicans are pushing for limiting that support to the Federal Housing Administration.
Fannie Mae and Freddie Mac were seized by regulators in 2008 as defaults on risky loans drove them toward insolvency. Taxpayers have spent $187.5 billion to keep them afloat. Republicans and Democrats alike are calling for the companies to be liquidated and replaced with a system based more on private capital.
As the housing market turned around, the companies become profitable and have sent $146 billion back to Treasury. Those payments count as a return on the government investment and not as a repayment of the debt.
Corker and Warner’s bill has support from 10 senators on the 22-member Senate Banking Committee. Their measure would replace Fannie Mae and Freddie Mac with a federal reinsurer that would step in only after private capital had taken least 10 percent of the first losses on mortgage securities. The government would step in with more aid during a financial catastrophe. The measure was written with technical input from the administration of President Barack Obama, who has endorsed the bill.
The House measure is unlikely to become law because it doesn’t have any Democratic support, isn’t backed by some Republicans, and housing industry representatives are lobbying heavily against it.
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