Representatives Gary Miller (R-CA) and Carolyn McCarthy (D-NY) have introduced new legislation (HR 1859) that would create a government-owned credit facility to replace Fannie Mae and Freddie Mac.
The Market Facility for Residential Mortgages Act of 2011 would create a single entity, owned by the federal government (i.e. no private shareholders), that would issue mortgage-backed securities (MBS). The MBS would have an explicit government guarantee paid for by a guarantee fee set by the Federal Housing Finance Agency (FHFA). FHFA would also be charged with making sure the facility’s market share did not exceed specified targets except during times of market disruption. Any profits generated by the new entity would flow to the Treasury Department.
Features of measure include:
- Explicit government guarantee paid for by guarantee fees
- Strong regulation by FHFA
- Ability to scale up government role in times of distress
- Maintains existing securitization capacity to supply liquidity to mortgage markets
- Provides access mortgage credit broadly, in all markets under all market conditions
- Continues the successful multifamily mortgage business line (although it is unclear whether all existing products fit within the language in the draft version of the bill)
The measure has drawn public support a variety of powerful real estate industry interest groups (NAHB, NAR); however, the measure is likely to face opposition from congressional conservatives. House Financial Services Chairman Spencer Bachus (R-Ala.), has said legislation (HR 1182) by Jeb Hensarling (R-Tex.) that would fully privatize the GSEs within five years is the panel’s ultimate goal. In order for the measure to be successfully enacted it would probably require significant support from Congressional Democrats.
The measure has been referred to the House Financial Services Capital Markets Subcommittee. This Subcommittee is scheduled to advance a series of incremental GSE reform bills the week of July 11.
