In an effort to spur substantive and structural housing finance reform, Senators Bob Corker, R-Tn., Mark Warner, D-Va., David Vitter, R-La., and Elizabeth Warren, D-Ma., all members of the Senate Banking, Housing and Urban Affairs committee, on Thursday introduced the “Jumpstart GSE Reform Act.”
The legislation would prohibit any increase in the guarantee fee – which is required to be charged by government-sponsored enterprises Fannie Mae and Freddie Mac – from offsetting other government spending. Additionally, the bill would prohibit the sale of preferred shares without congressional approval and structural housing finance reform. The preferred shares were purchased by the U.S. Treasury Department during the 2008 financial crisis and are within Treasury’s discretion to sell or otherwise dispose of. Any premature actions outside of structural reform will only build obstacles to a new housing finance system.
“The reality is that if Congress were to spend ‘g’fee’ revenue from the GSEs on other programs, reforming these mortgage behemoths would become nearly impossible. At the same time, if Treasury were to decide to sell its preferred share investment without Congress having first reformed our housing sector, we would just be returning to a time where gains are for private shareholders and losses are for taxpayers. Neither of these is an acceptable outcome, so I’m very happy that Senators Warner, Vitter and Warren have joined me in this effort, and I hope Congress will take the necessary steps to ensure housing finance reform can happen as soon as possible,” said Senator Corker.
“We know our housing finance system is not sustainable in its current form, and this legislation will keep us on a path to accomplish real reforms. We believe that as we transition Fannie and Freddie out of their present roles, we need to think about the system in its entirety. The guarantee fee should not be mixed with other funding needs, and the preferred shares should be handled as one step within a multi-year process. I look forward to working with Senator Corker and Senators Vitter and Warren on these important reform issues,” said Senator Warner.
“Reforming a broken housing finance system and protecting taxpayers is a win win, and we can begin that effort with this bipartisan GSE reform proposal. This bill shows that Republicans and Democrats do agree on the urgency required to reform the mortgage finance system. Reform can’t happen if the U.S. Treasury pulls a fast one on taxpayers by selling their preferred share investment but our bill will ensure the taxpayers will get the reform they were promised in 2008,” said Senator Vitter.
“It has been nearly five years since the financial crisis, and it is past time to reform Fannie and Freddie. That means removing the obstacles and starting a bipartisan effort to take on housing finance reform this Congress. I am pleased to have the opportunity to work with Senators Corker, Warner, and Vitter, and I look forward to collaborating with them and other Senators in the months ahead on this important issue,” said Senator Warren.