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Hagan Co-Sponsors Bipartisan Bill to Modernize and Reform Broken Housing Finance System

Proposal protects NC taxpayers while winding down Fannie Mae & Freddie Mac, preserving 30-year fixed-rate mortgage

Tuesday, July 16, 2013

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Washington, DC- U.S. Senator Kay Hagan is introducing bipartisan legislation with eight of her Senate Banking Committee colleagues to modernize and reform the country's broken housing finance system. The Housing Finance Reform and Taxpayer Protection Act winds down Fannie Mae and Freddie Mac-two government sponsored enterprises that have been in conservatorship for almost five years - and replaces them with a system that preserves liquidity in the mortgage market and protects taxpayers from future economic downturns.

"For too long, Congress has ignored our broken housing finance system. It is time we come together, Democrats and Republicans, to resolve this problem. This bipartisan bill provides an important roadmap for strengthening our housing finance system and protecting taxpayers while ensuring access to affordable, long-term mortgages for consumers," Hagan said. "I look forward to working with my colleagues to advance this bipartisan legislation that will put our housing finance system on a stable path."

"On behalf of North Carolina's banking industry and the 115 banks that are headquartered or have branches in our state, the North Carolina Bankers Association lauds the efforts of Senator Hagan for introducing bi-partisan government sponsored enterprise reform legislation," said Thad Woodard, president and CEO of the North Carolina Bankers Association. "The legislation is a solid start in addressing many longstanding issues, including the conservatorship of Fannie Mae and Freddie Mac, oversight and access points to the secondary market. We must continue this conversation to reform GSE's."

"In her role on the Senate Banking Committee, Senator Hagan has consistently been engaged and interested in issues, like housing finance reform, that impact North Carolina's 3.3 million credit union members," said John Radebaugh, President, North Carolina Credit Union League. "The ability of credit unions to continue to be able to offer their members access to affordable home mortgages is important to the future of our state. We view the legislation introduced in the Senate, and supported by Senator Hagan, as an important first step in creating a secondary housing market that is accessible, well regulated, and provides for long-term viability."

"I want to thank Senator Kay Hagan for her leadership in crafting comprehensive legislation to reform our nation's housing finance system," said Rick Judson, chairman of the National Association of Home Builders and a homebuilder from Charlotte. "For several years now we have been waiting for a comprehensive overhaul of the government sponsored enterprises (GSEs) Fannie Mae and Freddie Mac. This legislation is a much needed step in the debate on GSE reform. We look forward to working with Senator Hagan and participating in the discussions about reforming the mortgage finance system as the bill moves forward."

"On behalf of 30,000 members of the North Carolina Association of REALTORS®, I would like to thank Senator Hagan for taking the first step to begin a substantive discussion of housing finance reform," Patrice Willetts, President, North Carolina Association of REALTORS®. "We believe that the framework outlined in the ‘Housing Finance Reform and Taxpayer Protection Act' contains the necessary building blocks for establishing a new housing finance system for today and tomorrow. REALTORS® primary concerns remain that affordable, long-term financing is available to consumers regardless of economic conditions. This comprehensive reform legislation would enable the market to continue to provide long-term, fixed rate mortgage products that most consumers seek and trust. This bipartisan legislation will accelerate the conversation necessary to reform our housing finance system."

Please click here for a summary of The Housing Finance Reform and Taxpayer Protection Act that is co-sponsored by Senators Bob Corker (R-TN), Mark Warner (D-VA), Jon Tester (D-MT), Mike Johanns (R-NE), Jerry Moran (R-KS), Dean Heller (R-NV), Heidi Heitkamp (D-ND), and Mark Kirk (R-IL).

In 2008, Fannie Mae and Freddie Mac were taken into government conservatorship and given a $188 billion capital injection from taxpayers to stay afloat. Yet five years later, Fannie Mae and Freddie Mac continue to dominate the housing market - guaranteeing nine out of every ten mortgages made today. Despite this unsustainable situation, real reform to the housing finance has not happened since the financial crisis.

The Housing Finance Reform and Taxpayer Protection Act:

  • Mandates 10 percent capital, up front, for the system to protect taxpayers against future bailouts.
  • Winds down Fannie Mae, Freddie Mac and the Federal Housing Finance Agency (FHFA) within five years of bill passage.
  • Transfers appropriate utility duties and functions to the modernized, streamlined and accountable Federal Mortgage Insurance Corporation (FMIC), modeled in part after the FDIC.
  • Establishes a transparent and accountable market access fund that focuses on maintaining access to affordable rental housing, making grants to state housing agencies, and conducting borrower counseling programs at the state and local level.
  • Ensures institutions of all sizes have direct access to the secondary market so local banks and credit unions aren't gobbled up by the mega banks when Fannie and Freddie are dissolved.

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