The Partnership to Strengthen Homeownership Act combines the federal government's unique ability to provide capacity with the private sector's superior ability to price and analyze risk. Joining Delaney, Carney, and Himes are 9 additional original cosponsors: Rep.
The bill establishes an insurance program through
The bill winds down
"This legislation ensures that new homeowners will continue to have access to the affordable, predictable financing options they need, while protecting taxpayers and our economy from future downturns," said Congressman Himes. "Our bill combines the market's efficiency in pricing risk with government's ability to provide scale to create a safer, more liquid housing market that preserves access to affordable housing for American families."
"America needs housing finance reform for the long-term health of the economy, the viability of the American Dream of homeownership, and the protection of the U.S. taxpayer.
"The driving force behind my work on this bill is to keep home-buying affordable by preserving the thirty-year fixed rate mortgage, while protecting taxpayer dollars in the event of another housing downturn," said Congressman Carney. "We aren't the first group to try to find a solution to reforming our housing finance system. But we think our proposal has promise because it strikes the necessary balance between public and private sector involvement in the housing market. If we don't fix the current system, taxpayers continue to be the backstop in case of another crisis, and the thirty-year fixed rate mortgage is in danger."
The full text of the legislation is available here http://delaney.house.gov/sites/delaney.house.gov/files/Partnership%20to%20Strengthen%20Homeownership.pdf.
* Program 1: Reinsurance Bid Model
* Aggregators and issuers will be permitted to deliver qualified mortgage pools to
* Ginnie will secure forward reinsurance contracts on a periodic basis (30-90 days), with the assistance of a reinsurance broker appointed annually in a competitive process.
* The bids will seek coverage for two levels of risk on each securitization - the 5% "first loss" and the remaining 95% "second loss."
* From these bids, Ginnie will contract with a series of carriers for each risk and aggregate the policies.
* For the first loss, Ginnie will seek bids for 100% of its expected exposure.
* For the second loss, Ginnie will seek bids for 100% of its aggregate exposure but will offer retrocessional reinsurance for up to 90% of the second loss cover.
* Prices passed onto originators may vary based on quality of product, and other factors as determined by Ginnie, so long as the overall pricing is equivalent to a weighted-average bid in a given period.
* Program 2: Guarantor Model
* In addition to security level coverage, insurers/guarantors are authorized to issue loan level coverage to lenders as long as the coverage is for 100%, or if less than 100% loan level coverage, the servicer is responsible for any losses the guarantor did not cover
* Ginnie will reinsure bond guarantor and/or issuers by entering into contracts with private sector reinsurers sharing risk on a 90/10 pari passu basis
* To the extent
* Under either program, each mortgage-backed security meeting the outlined private sector capital requirements will carry the full faith and credit of the
* Banks, life insurance companies, REITS, insurance companies and other Ginnie approved market participants will be eligible to participate in the insurance and risk sharing transactions with
* All market participants will be overseen by
Small Lender Access
The Federal Home Loan Banks (FHLBs) will be authorized to aggregate and pool mortgages for small lenders.
* The platform will allow for standardized securities thus creating a single security and creating a deeper and more liquid TBA market which will reduce the cost of mortgage credit for consumers.
Standardized Mortgages, Servicing, and Capital Requirements
* Transition FHFA regulation to
* Mortgages eligible for the full faith guaranty must meet minimum underwriting standards.
* Ginnie will maintain the power to stress test all market participants and define adequate capital standards.
Fannie and Freddie
* Fannie and Freddie will be wound down over a five year period. Their government guarantee and charter will be removed and they will repay the government with interest for the government's investment in the institutions. The repayment must take into account both the injection of capital and the overall exposure to the government.
* During the transition, Fannie and Freddie may act as an aggregator for small lenders to retain small lender access to the new Ginnie Mae Platform.
* The transition will continue until competitive access for small lenders is established and Ginnie has achieved and adequate return to taxpayers and established a competitive private housing finance market.
* The assets of Fannie and Freddie will be returned to the private sector and may operate within the new mortgage system as issuers and/or aggregators.
* The fees charged will range 10 basis points of the total principal balance of these mortgages.
* The monies acquired will be allocated to strengthening affordable housing programs facilitated by the federal government. The funds received will be allocated to the
* Ginnie will be under a duty to serve all markets.
* Fannie and Freddie's multifamily business will be spun out as separate entities. Ginnie will be required to create and implement a workable multifamily guarantee that utilizes private sector pricing consistent with the single family model.
* The current multifamily businesses of Fannie and Freddie will continue to function within the new multifamily housing market as purely private organizations with an explicit government guarantee provided by
Well-functioning TBA Market
* Investors will receive timely principle and interest payments through
* This model will also ensure that the one standardized security is delivered to the TBA Market. This will increase liquidity and limit disruptions to the secondary mortgage market, which will ultimately benefit consumers.
Read this original document at: http://himes.house.gov/press-release/himes-delaney-and-carney-introduce-housing-finance-reform-legislation
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