Sen. Bob Corker, R-Tenn., has introduced the Residential Mortgage Market Privatization and Standardization Act (S.1834), which he says will ‘responsibly unwind government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac and end dependence on the government for housing finance.’
In a press statement issued by the senator's office, the legislation would wind down the GSEs through annual reductions of the percentage of newly issued mortgage-backed securities' (MBS) principal guaranteed by Fannie Mae and Freddie Mac. ‘The percentage guaranteed must be reduced to zero within 10 years, at which point MBS will be wholly privatized,’ says Corker.
The legislation also calls for the creation of an ‘industry-financed database that makes uniform performance and origination data on mortgages available to the public through the Federal Housing Finance Agency (FHFA).’ Corker also proposes the creation of a new to-be-announced futures market with no government guarantee and replacement of the Qualified Residential Mortgage and risk retention proposals with a 5% minimum down payment and full documentation requirement.
Furthermore, the legislation calls for a uniform pooling and servicing agreement and a new electronic registration system (dubbed ‘MERS 2’) where ‘all loans are transferred under one system regulated by the FHFA and instructs federal regulators to develop uniform practices and streamline mortgage regulations.’
‘We are no closer to transitioning Fannie Mae and Freddie Mac off government life support than the day the firms were taken under direct government control in 2008,’ says Corker. ‘We're introducing this bill to lay down a marker and get a conversation going that Washington has put off for far too long. We must begin the process of responsibly unwinding Fannie and Freddie.’
Corker's legislation currently does not have any co-sponsors.