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December 20, 2011
 
 

Isakson Bill Moves Debate Forward on Restoring Nation’s Housing Finance System

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Sen. Johnny Isakson (R-Ga.) on Dec. 8 introduced the Mortgage Finance Act of 2011, legislation that would create a new framework for a single-family and multifamily securitization market beyond Fannie Mae and Freddie Mac.

The legislation would shut down Fannie Mae and Freddie Mac within 18 months and create a transitional 10-year program for securitizing mortgages with a federal guarantee. At the end of this time, the federal backing would be removed and the program would be privatized. Of particular note, the legislation also addresses the issue of qualified residential mortgages (QRMs).

Under the Dodd-Frank Act, lenders are required to keep 5 percent of the mortgages they securitize. However, those who issue qualified residential mortgages would be exempt from this rule.

Federal regulators would require a 20 percent down payment for a loan to meet their narrow definition of a QRM, a proposal that has brought opposition from NAHB and the housing community because it would make it more difficult for most families to purchase a home.

Isakson’s bill would establish a new QRM definition that would allow minimum down payments of 5 percent.

NAHB policy opposes removing federal support for housing, but the Isakson bill is being viewed by many as a step toward bridging the policy divide in an increasingly polarized debate over the future of Fannie Mae and Freddie Mac and the housing finance system.

Action on comprehensive reform of housing’s government sponsored enterprises is not likely to move forward until after the 2012 elections.

Conservative lawmakers are seeking to end federal guarantees for the nation’s mortgage market while NAHB and many others in Congress believe it is imperative to maintain a federal backstop to ensure that there is an adequate supply of credit and that home mortgages remain affordable for typical middle-class households.

In addition to creating a new regulatory framework for high-quality mortgage securitization, the Mortgage Finance Act would:

•    Resolve the disposition of Fannie Mae and Freddie Mac through an orderly receivership process
•    Fully pay back taxpayers for the cost of bailing out Fannie Mae and Freddie Mac
•    Create a new facility to guarantee securitizations of QRM mortgages
•    Create a fund to protect against any future housing collapse

NAHB will continue its discussions with Sen. Isakson and bipartisan leaders in the House and Senate on the future of the housing finance system.

For more information, email Scott Meyer at NAHB, or call him at 800-358-5242 x8144.
 

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