Page 9 - February 2018 Disruption Report Flip Book

FANNIE MAE AND FREDDIE MAC JAN.U-FAERBY. 2018
approach to reforming the housing system that protects the taxpayer, preserves the 30-year fixed rate mortgage, includes robust access to all lenders and provides affordable housing subsidies.
Specifically, the revised Corker-Warner draft proposes:
1. The formation of “privately-owned descendants” of Fannie Mae and Freddie Mac, along with five or six private sector competitors, to guarantee mortgages and issue a single mortgage- backed security using the Common Securitization Platform, operated by Ginnie Mae.
2. The Federal Home Loan Bank System will jointly establish one or more single-family guarantors.
3. The federal government will provide a catastrophic guarantee, financed by a fee that would be deposited into a mortgage insurance fund.
4. Ginnie Mae will charge the guarantors an explicit guarantee fee—for discussion purposes, a 0.1% annual tax on the $5 trillion guaranteed mortgages—that generates $5 billion annually for low-income housing subsidies.
5. Fannie and Freddie will continue to operate under government conservatorship until competitors enter into the securitization market for mortgage loans.
6. The GSEs’ securitization infrastructure, historical data, and the underwriting systems developed by Fannie Mae, Freddie Mac and the Federal Home Loan Bank, will be privatized.
7. The GSEs’ charters will be retired and their investment portfolios would be nearly eliminated.
8. Certain market reforms already put in place by the Federal Housing Finance Agency (“FHFA”) would be codified in law.
Progressive groups express skepticism that Republican lawmakers will support a new housing finance system that helps low-income buyers as much as the GSEs do under their affordable housing goals. “If such groups can’t be won over, the Corker-Warner plan will likely fail,” according to Bloomberg Politics’ Joe Light.
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