The Senate bill that would reform the U.S. mortgage-finance system would fund increasing home ownership among low-income borrowers. But affordable housing advocates and more liberal lawmakers think that more should be done to address Fannie Mae and Freddie Mac.
“The draft, the result of discussions between Tennessee Republican Bob Corker and Virginia Democrat Mark Warner, gives the clearest view yet into how the senators aim to woo progressive politicians to back their plan for addressing mortgage-giants Fannie Mae and Freddie Mac. Support from those Democrats is likely needed to meet the 60-vote threshold for passing major bills in the Senate.”
Corker and Warner have proposed in their draft a “market access fee” to be levied on new loans. This money generated from the fee would help build affordable-rental housing and make it less expensive for low- and moderate-income households to borrow money to buy their own homes. The market access fees would generate a new funding stream for creating affordable housing.
But some affordable-housing groups are concerned that other pieces in the proposal might led to less assistance than is currently available.
“If the authors move to appease those critics, they could lose Republicans who want the government’s involvement in the mortgage market to be reduced if not eliminated.”
But it is important to remember that that at this point, the proposal is just that – a proposal and nothing in the bill has been decided or finalized.
Warner spokeswoman Rachel Cohen said in an email that “to get his support, any proposal would have to have strong affordability provisions, including enhanced assistance for first-time homebuyers.”
As background, Fannie Mae and Freddie Mac were created by Congress and have been under government control since the 2008 financial crisis.
They perform an important role in the nation’s housing finance system – to provide liquidity, stability and affordability to the mortgage market.
They provide liquidity (ready access to funds on reasonable terms) to the thousands of banks, savings and loans, and mortgage companies that make loans to finance housing.
Fannie Mae and Freddie Mac buy mortgages from lenders and either hold these mortgages in their portfolios or package the loans into mortgage-backed securities (MBS) that may be sold. Lenders use the cash raised by selling mortgages to the Enterprises to engage in further lending.
The Enterprises’ purchases help ensure that individuals and families that buy homes and investors that purchase apartment buildings and other multifamily dwellings have a continuous, stable supply of mortgage money.