Marking the 10th anniversary of the conservatorship of housing GSEs Fannie Mae and Freddie Mac, House Financial Services Committee Chairman Jeb Hensarling (R-Texas) and Rep. John Delaney (D-Md.) today circulated draft legislation that would repeal the GSEs’ federal charters and direct Ginnie Mae instead to guarantee privately insured mortgage-backed securities.
The bill is designed to employ Ginnie Mae’s existing mechanisms, directing the agency to establish a new program called Ginnie Mae Plus that would help preserve the 30-year fixed-rate mortgage on current conventional terms. Ginnie Mae would take over the mortgage guarantee function currently served by Fannie and Freddie, but with an explicit, fully paid government guarantee that kicks in after private capital. The bill also seeks to enhance small lenders’ access to the secondary market and expand the role of private capital.
American Bankers Association EVP James Ballentine said he appreciated Hensarling and Delaney’s work. “We share the goals set forth in the legislation to ensure a safe, sustainable, transparent and liquid mortgage credit market for all Americans wishing to own a home,” he said. “We share their desire to create a level playing field to finance a single family mortgage, allowing risk to be allocated to those entities which are best able to manage it and avoid institutions dominating or restricting access to the mortgage market.”
The plan differs from a legislative approach long favored by Hensarling that would eliminate the government mortgage guarantee altogether. He acknowledged in a Wall Street Journal op-ed today that “comprehensive market-based reform isn’t achievable now” and that “the prudent move is to shift toward a more rational system that puts private capital first and disperses risk.”