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Rep. Scott Garrett (R-N.J.), chairman of the House Financial Services Subcommittee on Capital Markets and Government Sponsored Enterprises, on Oct. 28 unveiled plans to reform the nation’s mortgage markets by ending the federal backstop for housing now being provided by Fannie Mae and Freddie Mac.
Garrett said he hopes to lay the groundwork for a new secondary mortgage market after Fannie Mae and Freddie Mac have been dismantled.
“Now that we have taken the important step of introducing a series of bills to wind down the government-backed mortgage twins, it’s time to start thinking about the ways we can jump start the private market to step in once they’re gone,” he said.
“My proposal to reform the secondary mortgage market will facilitate continued standardization and uniformity, ensure rule of law and legal certainty, and provide investors with the standardization and transparency necessary to ensure that a deep and liquid market develops in the absence of Fannie and Freddie,” he said.
While the specific legislation has yet to be unveiled, Garrett’s bill is expected to direct the Federal Housing Finance Agency to set standards and underwriting criteria for several categories of mortgages, and develop standards and uniform practices for issuing mortgage-backed securities in an effort to spur continued and sustained investor participation in the market.
NAHB has told Garrett that while the association is willing to work with him to ensure that any future private securitization market is strong and vibrant, the association strongly believes that Congress must preserve some form of government guarantee for mortgage-backed securities to ensure a reliable and adequate flow of affordable housing credit under all economic and financial conditions.
NAHB is likely to focus its opposition on the dismantling of Fannie and Freddie’s federal backing rather than on the specific provisions proposed in the bill.
NAHB will keep the membership updated on this proposal and other housing finance bills that will be debated by the House Financial Services Committee in the coming weeks and months.
For more information, email Scott Meyer at NAHB, or call him at 800-368-5242 x8144.