U.S. Sens. Mark Warner (D-Va.) and Bob Corker (R-Tenn.) introduced legislation Tuesday to reform America's housing finance system by replacing the government-sponsored enterprises Fannie Mae and Freddie Mac with a privately capitalized system.

“Housing finance is the last piece of unfinished business remaining after the 2008 economic meltdown,” Warner said in a release.

“We have designed thoughtful reforms that will protect taxpayers from future downturns while responsibly preserving the availability of the 30-year fixed-rate mortgage for homebuyers,” the Virginia Democrat said. “We believe the housing market is ready for reforms like this, and the private sector has been waiting for new rules of the road.”

The Warner-Corker bill is co-sponsored by six colleagues on the Senate Banking Committee: Sens. Mike Johanns (R-Neb.), Jon Tester (D-Mont.) Dean Heller (R-Nev.) Heidi Heitkamp (D-N.D.), Jerry Moran (R-Kan.) and Kay Hagan (D-N.C.).

“Five years after the financial crisis, it is past time for us to modernize our unstable system of housing finance,” Corker said. “The framework we're presenting here will protect taxpayers while maintaining market liquidity, and is the best opportunity we'll have to finally move beyond the failed GSE model of private gains and public losses.”

The bill, titled the Housing Finance Reform and Taxpayer Protection Act, would wind down Fannie Mae, Freddie Mac and the entire Federal Housing Finance Agency within five years. It would transfer the FHFA's functions to a Federal Mortgage Insurance Corp., which would be modeled after the FDIC and would mandate 10% capital to protect against future bailouts.

The bill would have the corporation collect FMIC user fees from those participating in the secondary market system that and put them toward an accountable market access fund that would provide sufficient affordable housing for lower- and middle-income buyers.

And perhaps most importantly for credit unions, the bill ensures institutions of all sizes – including credit unions – would have direct access to the secondary market after Fannie and Freddie are dissolved.

The FHFA said in a statement following the bill's introduction, that after five years of GSE conservatorship, congressional action is needed to resolve the situation and expand private sector participation in the housing finance market.

The statement said: “We realize that this bill is a starting point for the debate, and we are eager to work with the leadership of the Senate Banking Committee, the authors, and other committee members to improve the bill in a way that creates a vibrant secondary market capable that works for lenders of all sizes and business models so they can support both the owner-occupied and the multifamily rental housing markets.”

Gary Thomas, president of the National Association of Realtors, commended Warner and Corker for “taking a thoughtful and comprehensive approach to drafting a bill to restructure the secondary mortgage market in a way that provides sufficient liquidity to the market so that lenders can offer a full range of sustainable mortgage credit to qualified borrowers through all market conditions.”

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Warner-Corker Bill Would Privatize Secondary Mortgage Market

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