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House Dems ready mortgage finance system overhaul bill

Three House Democrats are prepping legislation they hope will attract bipartisan support in overhauling the housing finance system.

Reps. John DelaneyJohn Kevin Delaney2020 Dem contenders travel to key primary states Overnight Tech: FTC nominees promise focus on data breaches | FCC chair backs SpaceX broadband project | AT&T wants antitrust chief to testify in merger trial Experts fear US losing ground to China on AI MORE (Md.), John CarneyJohn Charles CarneyDemocrats divided over Biden run Dem urges passage of voting rights legislation House passes expatriate O-Care patch MORE (Del.), and Jim HimesJames (Jim) Andres HimesDem lawmaker rips Congress after Florida shooting: They're in the thrall of the NRA Lawmakers in dark about 'phase two' of Nunes investigation Dem: Trump ‘dragged this country deep into the mud of autocracy and dictatorship’ with ‘treason’ comment MORE (Conn.) have outlined a proposal they plan to unveil this spring that would aim to spur more private capital into the mortgage market while maintaining a level of government support to ensure liquidity.

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Himes told The Hill the proposal aims to create a balanced public-private approach that satisfies Democrats' demands — preserving the 30-year fixed-rate mortgage — while letting the private sector price the risk, which provides mortgage market discipline, a necessary component for Republicans. 

He said that the underlying idea is to focus on the strength of the government — providing guarantees — and the private sector, pricing the risk. 

The lawmakers say the government's role would help expand the availability of capital in the insurance market, while ensuring the mortgage market is open and efficient.

"It keeps everyone in their lanes," Himes said. 

The framework would have private capital take up to the first 5 percent of loss on credit risk, compared with a Senate plan that calls on a 10 percent coverage.

“To ensure a stable housing finance system, we must move past the current state to a new system that engages more private sector capital." Delaney said. 

The government, acting through Ginnie Mae, in partnership with private capital will provide reinsurance of up to 95 percent of any mortgage securitization, according to the plan's details. 

Himes said the trio has been talking to House Financial Services Committee Chairman Jeb HensarlingThomas (Jeb) Jeb HensarlingMick Mulvaney has ignited a firestorm to rein in the CFPB Exiting lawmakers put in calls to K Street GOP rep hits party for passing budget, government funding deal MORE (R-Texas) and "he has not discouraged us" from developing another plan.

He also said they have gotten "good feedback" from officials at Ginnie Mae, and the Department of Housing and Urban Development, as they continue to craft their legislation. 

Under the bill, the private sector and the government would receive the same pricing and have the same risk. 

Himes said he would expect private capital to be lured back into the market by the fact that they can price risk and make a profit. 

The plan includes a gradual wind down and sell off of mortgage giants Fannie Mae and Freddie Mac without any government support or monopoly status.

The legislation also includes a provision that says in times of crisis and the private sector is not a willing participant, the government can take over again. 

Himes said the proposal also would provide better signals as to when mortgage pools are getting too risky or speculative. 

Hensarling's panel approved a GOP-crafted plan during the summer, but the measure, which has no Democratic support, has not reached the House floor for a vote. 

In the Senate, Sens. Mark WarnerMark Robert WarnerLawmakers worry about rise of fake video technology Mueller indictment reveals sophisticated Russian manipulation effort GOP cautious, Dems strident in reaction to new indictments MORE (D-Va.) and Bob CorkerRobert (Bob) Phillips CorkerCongress punts fight over Dreamers to March Drama surrounding Shulkin — what is the future of VA health care? Blackburn pushes back on potential Corker bid: 'I'm going to win' MORE (R-Tenn.) have introduced a measure that has created a foundation from which leaders of the Senate Banking Committee have been working. 

Add to that an expected plan by Financial Services Committee ranking member Maxine WatersMaxine Moore WatersMaxine Waters calls for Kelly to resign over handling of Rob Porter allegations Maxine Waters defends Oprah to Trump: She's 'richer than you' Dem lawmakers attend 'Black Panther' screenings on opening weekend MORE (D-Calif.) and there could be, at least, five plans by the spring. 

That could set up an eventual compromise between the plans. 

After years of inactivity, steam is finally building behind the effort to overhaul the mortgage finance system more than five years since the financial crisis and housing crash. 

"We hope our legislation will complement these efforts," Delaney said. 

Mortgage industry experts are expecting lawmakers to speed up the pace of work on a mortgage finance plan this year. 

Fannie and Freddie were taken under government control and needed $188 billion to stay afloat during the 2008 financial crisis.