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The House Committee on Financial Services held a hearing on September 6 on the 10-year anniversary of the GSEs being placed into conservatorship titled “A Failure to Act: How a Decade without GSE Reform Has Once Again Put Taxpayers at Risk.”  Chairman Hensarling introduced a new bipartisan bill, co-authored with Representatives John Delaney (D-MD) and Jim Himes (D-CT), for housing finance reform titled the “Bipartisan Housing Finance Reform Act of 2018”.

The proposed legislation is a combination of previously issued attempts at reform, but, importantly, includes  a full government guarantee for mortgage backed securities. This feature, long-opposed by Chairman Hensarling, could provide the first steps towards legislative reform. Rep. Delaney thanked the Chairman for working with him to produce a bi-partisan proposal.  Notably, Delaney cited the strong multifamily business model as a reason that the bill took a “do-no-harm” approach in the proposal. 

SEC. 302. MULTIFAMILY PRINCIPLES.

The sponsors recognize the importance of multifamily financing in providing housing options and affordable rental properties and seek to preserve what works in the market today. The sponsors believe that the current multifamily business of Fannie and Freddie will continue to function within the new multi-family housing market as entities with an explicit government guaranty of their multifamily securities provided by Ginnie Mae.

NMHC/NAA submitted a letter ahead of the hearing calling on Congress to preserve mortgage liquidity currently provided by the GSEs in all markets during all economic cycles. This can be achieved either through: (1) the existing GSE structure; or (2) a reformed structure that preserves the high-quality and value of the current multifamily secondary mortgage market’s activities.

Along with a number of other trade associations, NMHC/NAA also submitted a coalition letter to the Committee on Financial Services before the hearing. This letter calls on Congress to enact permanent GSE reform. Specifically, it acknowledges that reforms put in place during conservatorship have stabilized the market and that they should be made permanent for continued stability.