U.S. Sen. Pat Toomey (R-PA) released guiding principles for housing finance reform and established a framework for legislation to end the government sponsored enterprise (GSE) duopoly.
“The housing finance system remains in urgent need of reform,” Toomey, ranking member on the Senate Banking Committee, said. “The current system exposes taxpayers to risk of future bailouts, fosters excessive risk taking, and crowds out private capital. I hope my colleagues, the administration, and all interested stakeholders will join me in working to implement these responsible reforms to prevent yet another financial crisis.”
Toomey’s guiding principles would end Fannie Mae and Freddie Mac’s conservatorships and transition the GSE duopoly toward a competitive secondary market. Further, they would establish a level playing field for other sources of private capital that bear mortgage credit risk. In addition, the principles call for a liquid secondary mortgage market that promotes the continued availability of affordable 30-year and other long-term fixed-rate mortgage loans.
Also, the guiding principles promote equitable access to the secondary mortgage market by mortgage lenders of all sizes, business models, charter types, and locations. Finally, they seek to ensure that significant first-loss private capital stands in front of any government support and that taxpayers are appropriately compensated for that support.
SIFMA – a trade association for broker-dealers, investment banks, and asset managers – supports Toomey’s guiding principles.
“SIFMA applauds Ranking Member Toomey for publishing principles for GSE reform,” SIFMA President and CEO Kenneth Bentsen, Jr. said. “SIFMA has long supported comprehensive housing finance reform that includes a government guarantee to ensure the continued liquidity of the TBA MBS market. We urge Congress to enact thoughtful reform that creates a permanent solution to the ongoing conservatorships of the GSEs.”
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