A recently unveiled plan to phase out Fannie Mae and Freddie Mac and overhaul the secondary mortgage market may have hit another snag, with six key senators reportedly deciding not to give their support.
According to a report from Bloomberg, in a private meeting on Wednesday, Sens. Elizabeth Warren (Massachusetts), Charles Schumer (New York), Sherrod Brown (Ohio), Jeff Merkley (Oregon), Robert Menendez (New Jersey), and Jack Reed (Rhode Island)—all six of them Democrats—agreed they won’t support a bill proposed by Senate Banking Committee Chairman Tim Johnson (D-South Dakota) and Ranking Member Mike Crapo (R-Idaho) unless they’re able to make major changes during markup.
Taking cues from another piece of legislation authored last year by Bob Corker (R-Tennessee) and Mike Warner (D-Virginia), the Johnson-Crapo proposal would wind down and eventually eliminate Fannie and Freddie, transferring their functions to a newly created government corporation intended to provide insurance for mortgage-backed securities when losses exceed a 10 percent barrier put up by private investors.
Citing reports from “three people familiar with the meeting,” Bloomberg says the six committee members agreed that the planned structure for the new corporation “seemed unworkable” and that the proposal lacked adequate support for affordable housing goals.
A committee vote on the bill was already postponed in late April after two senators indicated they would be opposed to pushing the proposal forward, with the other four saying they were undecided.
With so many Democrats opposed to the bill in its current iteration, its chances of passing in a narrowly Democratic Senate seem unlikely.
Nevertheless, the proposal’s creators remain optimistic. In an email to theMReport.com, Johnson spokesperson Sean Oblack issued the following statement: “Housing Finance Reform is going to pass out of the Banking Committee next week with bipartisan support, which is a landmark achievement for such a complicated and controversial issue. We have made significant progress bridging the divide among those previously undecided, and the committee vote is just a first step. Those involved in the negotiations have indicated they are interested in continuing to work together to try and find common ground, so the Banking Committee will keep working after favorably reporting out the bill next week.”