On July 11, 2013, House Financial Services Committee Chairman Jeb Hensarling (R-Texas) released the Protecting American Taxpayers and Homeowners Act (PATH Act) that would eliminate government guarantees for multifamily and single-family mortgage products, wind down government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac, overhaul the Federal Housing Authority’s (FHA’s) multifamily loan products, delay changes in Basel III bank capital standards and repeal real estate-related portions of the Dodd-Frank Act.
More specifically, the legislation would:
- Wind down Fannie and Freddie on a five-year schedule, revoking the existing GSE charters and liquidating all remaining assets.
- Transfer the remaining securitization platforms at the GSEs to a newly created entity, the National Mortgage Market Utility, which would facilitate access to the secondary market for loan originators.
- Charge the new National Mortgage Market Utility with developing “best practices” standards for private origination, data collection, servicing, pooling and securitization of mortgages. Both functions of the utility organization would be regulated by the Federal Housing Finance Agency.
- Separate FHA from the U.S. Department of Housing and Urban Development (HUD), requiring that it be a self-sustaining, free-standing agency.
- Require FHA multifamily loans to meet occupancy and rent restrictions, including affordability requirements based on area median income.
- Repeal portions of the Dodd-Frank Act related to real estate and capital markets.
- Institute a stay on Basel III capital rules, pending a two-year “stop and study” on the costs, impact and complexity of the rules for lending institutions.
Although Chairman Hensarling’s draft bill would dramatically change the way multifamily loans are financed, it simply represents his opening gambit in what will undoubtedly be a long legislative process.
The House Financial Committee has invited NMHC/NAA’s input, and we are actively engaged in working to ensure that multifamily capital markets are not disrupted. This effort complements our interaction with members in both the House and Senate on this and other housing finance legislation.
In terms of immediate action, the Financial Services Committee has scheduled a hearing on the bill for July 18 and is considering a markup prior to the August congressional recess.