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 DelaneyDid Congress just settle for less than best plan to reform housing finance? 2020 Dems jockey for position before midterm elections Avenatti mocks 'YUGE' protest at his Ohio speech MORE (Md.), John CarneyJohn Charles CarneyDelaware bans gay conversion therapy New Jersey governor signs sports betting into law GOP New Hampshire governor signs law banning gay conversion therapy MORE (Del.), and Jim HimesJames (Jim) Andres HimesDid Congress just settle for less than best plan to reform housing finance? Senate panel postpones election security bill markup over lack of GOP support Three scenarios for how leadership races could play out in the House 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.


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 HensarlingKavanaugh hires attorney amid sexual assault allegations: report Did Congress just settle for less than best plan to reform housing finance? The White House can — and should — bypass Congress to kill Obama-era spending 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 WarnerHillicon Valley: North Korean IT firm hit with sanctions | Zuckerberg says Facebook better prepared for midterms | Big win for privacy advocates in Europe | Bezos launches B fund to help children, homeless Bipartisan trio asks US intelligence to investigate ‘deepfakes’ Warner: 'overwhelming majority' of Republicans would back social media regulations MORE (D-Va.) and Bob CorkerRobert (Bob) Phillips CorkerMurkowski echoes calls for Kavanaugh, accuser to testify Kavanaugh, accuser to testify publicly on Monday Kavanaugh furor intensifies as calls for new testimony grow 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 WatersKavanaugh hires attorney amid sexual assault allegations: report Scalise: Democrats need to denounce political violence Women wield sizable power in ‘Me Too’ midterms 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.