GSE Reform: Maxine Waters Unveils a Rival Housing Finance Bill

California Rep. Maxine Waters, the top Democrat on the House Financial Services Committee, unveiled an alternative housing finance reform proposal on March 27 to rival three other bills jockeying for support in the House of Representatives and the Senate.

Known as the Housing Opportunities Move the Economy (HOME) Forward Act, the legislation ends Fannie Mae and Freddie Mac, and creates a new cooperative-owned issuer.

Earlier, Financial Services Committee Chairman Jeb Hensarling, R-Texas, introduced a bill — called the Protecting American Taxpayers and Homeowners Act, or PATH — which would unwind Fannie Mae and Freddie Mac and remove a government guarantee from the secondary market altogether. The legislation was introduced in July and passed the committee largely down party lines, though questions now remain over whether the bill will move to the House floor. Hensarling’s bill (HR  2767) all but removes government support for housing finance.

Democrats, including Waters, have been vocal in their opposition to Hensarling’s bill, warning that it would undermine the 30-year mortgage and fails to help low-income borrowers and renters. But Waters has virtually no chance of getting her bill to reform the government sponsored enterprises (GSE) through the Republican-run House.

Another bill in the Senate, introduced by Banking Committee Chairman Tim Johnson, D-S.D., and Sen. Mike Crapo, R-Idaho, the ranking member, is working on bipartisan housing  finance reform. The Johnson-Crapo plan, unveiled March 11, would create a new Federal Mortgage Insurance Corp. (FMIC), which would be modeled under the Federal Deposit Insurance Corp.

Both the Waters and Johnson-Crapo plans would preserve government backing, each creating a federal insurance fund to mitigate losses suffered by the private mortgage market — similar to the current set-up by Fannie Mae and Freddie Mac.

The odds of the House adopting the Senate proposal are small to none. Additionally, with the mid-term elections looming, it is unlikely that Congress is going to tackle GSE reform before November. And some have argued that the GSEs are “profitable”  so there’s no need to do anything anytime soon.

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