Housing Finance Reform and Taxpayer Protection Act
The Corker-Warner Housing Finance Reform and Taxpayer Protection Act (S. 1217), introduced on June 25, 2013, would strengthen America’s housing finance system by replacing government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac with a privately capitalized system that preserves market liquidity and protects taxpayers from future economic downturns.
In 2008, Fannie Mae and Freddie Mac were taken into government conservatorship and given a $188 billion capital injection from taxpayers to stay afloat. As a result of this bailout, the private market has almost completely disappeared, and so nearly every loan made in America today comes with a full government guarantee. Despite this unsustainable situation, there has still been no real reform to our housing finance system since the financial crisis.
- Mandates 10 percent capital, up front, for the system to protect taxpayers against future bailouts.
- Winds down Fannie Mae, Freddie Mac and the Federal Housing Finance Agency (FHFA) within five years of bill passage.
- Transfers appropriate utility duties and functions to the modernized, streamlined and accountable Federal Mortgage Insurance Corporation (FMIC), modeled in part after the FDIC.
- Replaces the failed “housing goals” of the past with a transparent and accountable market access fund that focuses on ensuring there is sufficient decent housing available. The fund is NOT paid for with tax dollars, but through a small FMIC user fee that only those who choose to use the system pay.
- Ensures institutions of all sizes have direct access to the secondary market so local banks and credit unions aren’t gobbled up by the mega banks when Fannie and Freddie are dissolved.
Sponsors of the bill include U.S. Senators Bob Corker, R-Tenn., Mark Warner, D-Va., Mike Johanns, R-Neb., Jon Tester, D-Mont., Dean Heller, R-Nev., Heidi Heitkamp, D-N.D., Jerry Moran, R-Kan., Kay Hagan, D-N.C., Mark Kirk, R-Ill., Joe Manchin, D-W.V., and Saxby Chambliss, R-Ga.
Press releases, a summary of the legislation and bill text are available below.