Washington is buzzing this week with the long-awaited announcement on housing finance reform that makes clear lawmakers’ plans to wind down Fannie Mae and Freddie Mac. On the eve of the March 11 announcement by Senators Tim Johnson (D-SD) and Mike Crapo (R-ID), NMHC/NAA were invited to a private Senate Banking Committee briefing where the Senators unveiled their new bipartisan principles for reform for only a handful of organizations - serving as recognition of our commitment to getting housing finance reform right for the multifamily industry and the 18 million Americans who call an apartment home.
The principles closely follow a proposal released last year by Senators Bob Corker (R-TN) and Mark Warner (D-VA) and are receiving a strong statement of support from the White House. Overall the principles include replacing Fannie and Freddie with a new system of mortgage securities that will be federally-insured. Under the plan, private insurers would be required to take initial losses before any government guarantee that could result in American taxpayers footing the bill.
In addition, the principles incorporate many of the provisions that NMHC/NAA advocated for on behalf of the industry, including promoting stable, liquid and efficient mortgage markets, maintaining the current network of multifamily lenders and servicers, and supporting more opportunities for private capital debt providers to serve the apartment sector.
On the House side, Representative Jeb Hensarling (R-TX) isn’t showing any willingness to change his bill, the Protecting American Taxpayers and Homeowners (PATH) Act, which proposes privatizing Fannie and Freddie. The prospects for passage of housing finance reform are not high this year in general, but the principles serve as an important starting point for possible legislative action after the 2014 mid-term elections.
Wall Street’s reaction to the new principles was instant with Fannie and Freddie’s shares plummeting 40 and 30 percent, respectively, as a result of the announcement.
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