The housing finance reform bill introduced in March by Sens. Tim Johnson, D-S.D., and Mike Crapo, R-Idaho, has been narrowly approved by the Senate Banking Committee, where the two men serve as chairman and ranking member, respectively. However, as of Thursday, it was unclear whether the bill would be forwarded to the Senate floor for further debate and consideration.
The bill, which builds on a proposal introduced last year by Sens. Bob Corker, R-Tenn., and Mark Warner, D-Va., calls for winding down and eliminating government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac over a period of five years, replacing them with a Federal Mortgage Insurance Corporation (FMIC) that would backstop qualified mortgages (QMs).
As with the Corker-Warner bill – which had support from the Obama administration but never made it to the Senate floor – the Johnson-Crapo proposal would transfer certain functions that the GSEs currently handle to the ‘modernized, streamlined and accountable’ FMIC, which will be modeled after the FDIC. Lenders would be required to allocate 10% private capital, up front, in order to fund the FMIC.
The bill also calls for the creation of a member-owned securitization platform that will issue a single, standardized FMIC-wrapped security, and permit private label securities to be issued in a manner that encourages standardization and improved market liquidity.
Six Democrats and seven Republicans on the 22-member committee voted for the measure – barely enough to move it forward. Senate Majority Leader Harry Reid will next decide whether to forward the bill to the chamber floor for a full vote – a move which some say is highly unlikely, considering the bill was opposed by key Democrats who have played a heavy hand in housing finance reform, including Sen. Elizabeth Warren, D-Mass.
Both Sens. Johnson and Crapo have acknowledged that the bill needs more backing.
‘After exhausting every option to try and strike a deal quickly that would add votes at the committee level, I have concluded it is best to move forward with the majority we have now in committee and continue working to build support for the bill as it moves to the floor,’ Johnson said at a hearing where the vote was cast, as per a Bloomberg News report.
Committee members who voted against the plan had expressed concern that it doesn't do enough to free up mortgage credit for lower-income Americans. Some also voted against the proposal out of fear that any finance reform might take the remaining steam out of the housing recovery, which has been slowing in recent months.
Even if the bill passes in the Senate, it will have to be reconciled with any measure that might make it out of the Republican-controlled House – a difficult feat considering the short amount of time remaining in the session and the inherent complexities of the legislation.
In a statement, David stevens, president and CEO of the Nortgage Bankers Association (MBA), said ‘MBA commends the Senate Banking Committee for voting this bill out of committee for consideration by the full Senate. Chairman Johnson and Ranking Member Crapo are to be applauded for coming together in a bi-partisan fashion and creating a piece of legislation that reforms our housing finance system in a way that ensures sufficient liquidity for single family and multifamily mortgages while also protecting taxpayers.
‘Passing the committee is an important step on the road to reform, but plenty of work remains. MBA is eager to continue working with the members of the Senate, as well as other stakeholders, to find common ground and bring housing finance reform legislation to the Senate floor.’
For more, check out the Bloomberg News report.