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House Democrats Introduce Legislation to Reform Housing Refinance System

Three U.S. House Democrats have introduced legislation to reform the housing finance system in an effort to “protect the fixed-rate 30-year mortgage.” Rep. John K. Delaney (Maryland), Rep. John Carney (Delaware), and Rep. Jim Himes (Connecticut) said the bill would wind down Fannie Mae and Freddie Mac and allows the GSEs to be sold and recapitalized.

“Without access to quality affordable housing, there’s no American Dream for millions of middle class families,” Delaney said in a press release. “I’m proud to work with Congressman Himes and Congressman Carney on legislation that keeps the fixed-rate thirty-year mortgage alive and preserves a government guarantee while introducing greater fiscal responsibility and stability to the housing finance system. The financial crisis and the bailout of Fannie Mae and Freddie Mac made it clear that we need reform to protect taxpayers.

The congressmen said protecting the 30-year fixed rate mortgage is key because it ensures “home affordability for the middle class and shields American taxpayers from future bailouts by reforming the housing finance system.”

“This proposal seeks to preserve housing affordability while protecting taxpayers from another bailout," Carney said in the release. “It finds the middle ground between public sector and private sector involvement in the housing sector. If we to want to preserve the dream of home ownership and make sure taxpayers aren’t on the hook for another bailout -- the status quo has to change.”

The Partnership to Strengthen Homeownership Act combines the private sector’s superior ability to price risk with the federal government’s unique ability to provide capacity, according to the congressmen. In addition to reforming Fannie and Freddie, the bill establishes an insurance program through Ginnie Mae. Through this program all government guaranteed single-family and multi-family mortgage-backed securities will be supported by a minimum of 5 percent private sector capital, which will stand in a first loss position. The remaining 95 percent of the risk will be shared between Ginnie Mae and a private reinsurer.  Fees paid to Ginnie Mae for providing these securities will be allocated to affordable housing programs.

“This bill ensures that new homeowners will continue to have access to the affordable, predictable financing options they need, while safeguarding taxpayers and our economy from future downturns,” Himes said. “Our legislation brings together the market’s efficiency in pricing risk with government's unique ability to provide scale to create a safer, more liquid housing market that preserves access to affordable housing for American families.”

About Author: Samantha Guzman

Samantha Guzman is an award-winning visual journalist and graduate of the University of North Texas Mayborn School of Journalism. She specializes in visual storytelling and has skills in video, audio and photography, in addition to news writing. She has traveled to Mexico and Bosnia as an assistant for multiple multimedia projects and taught news writing, photojournalism, and narrative storytelling in the past.
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