Sen. Toomey Issues Housing Finance Reform Principles
Sen. Pat Toomey, R-Pa., ranking member of the Senate Banking Committee, yesterday released a set of guiding principles for housing finance reform, a move welcomed by the Mortgage Bankers Association.
Toomey’s proposal establishes a framework for legislation to end the government-sponsored enterprise duopoly and foster a liquid secondary mortgage market while protecting taxpayers and promoting equitable access for all lenders. It includes the following provisions:
–Transition the GSE duopoly toward a competitive secondary market;
–End the conservatorships of Fannie Mae and Freddie Mac;
–Establish a level playing field for other sources of private capital that bear mortgage credit risk;
–Foster a liquid secondary mortgage market that promotes the continued availability of affordable 30-year and other long-term fixed-rate mortgage loans across the United States and throughout the economic cycle;
–Protect taxpayers by ensuring that significant first-loss private capital stands in front of any government support and that taxpayers are appropriately compensated for that support;
–Promote equitable access to the secondary mortgage market by mortgage lenders of all sizes, business models, charter types, and locations; and
–Provide for a smooth transition to the reformed housing finance system by ensuring that reforms are incremental and realistic, leveraging the existing regulatory and market structure.
“The housing finance system remains in urgent need of reform,” Toomey said. “The current system exposes taxpayers to risk of future bailouts, fosters excessive risk taking, and crowds out private capital. I hope my colleagues, the administration, and all interested stakeholders will join me in working to implement these responsible reforms to prevent yet another financial crisis.”
MBA President & CEO Bob Broeksmit, CMB, issued the following statement on the Toomey proposal:
“MBA welcomes the housing finance reform principles released by Senator Pat Toomey, as they demonstrate a commitment to protecting taxpayers, ensuring the ongoing affordability of the 30-year fixed-rate mortgage and promoting equitable access to the secondary market. These principles include features common to several other proposals offered by lawmakers from both sides of the political aisle committed to meaningful reforms, highlighting growing consensus on the actions that are needed. We look forward to continuing our work with Senators Sherrod Brown and Toomey, Representatives Maxine Waters and Patrick McHenry, FHFA and the Biden administration to help enable secondary mortgage market reforms that appropriately manage risk, support affordable rental housing and homeownership and provide a smooth transition toward a more competitive marketplace.
“Since 2008, MBA has advocated for the clear and continuing need to responsibly end the conservatorships of Fannie Mae and Freddie Mac and put in place policy measures that ensure appropriate market functioning, such as the establishment of an explicit government backstop for securities issued by Fannie Mae and Freddie Mac. We have consistently engaged in a constructive, bipartisan dialogue with congressional leaders, the executive branch, and key stakeholders seeking to advance housing finance reforms that will achieve a more vibrant, sustainable secondary mortgage market – and we will continue to do so.”