Senate Banking Committee Considers Framework for Housing Reform Legislation

The U.S. Senate Committee on Banking, Housing and Urban Affairs (the "Committee") heard testimony from various witnesses on Chair Mike Crapo's (R-IA) proposed framework for housing reform legislation.

Released in February, the framework for reform would:

• protect taxpayers by reducing the too-big-to-fail risk posed by the current "duopoly of mortgage guarantors";

• keep existing infrastructure in the housing finance system that works well, while increasing the role of private risk-bearing capital;

• create new layers of protection between mortgage credit risk and taxpayers;

• ensure a level playing field for originators, while also instituting uniform and responsible underwriting standards; and

• foster broad accessibility to mortgage credit, including in underserved markets.

In statements over the course of two days of hearings (see here and here), Mr. Crapo said that Fannie Mae and Freddie Mac, together with government-insured mortgages, dominate the mortgage market. He asserted that the status quo is not "viable," and stressed that finding a comprehensive, legislative solution is a top priority for the Committee. Additionally, Mr. Crapo expressed his commitment to ending the "conservatorship era" and to establishing "a durable, sustainable new housing finance system that works for all Americans."

Several witnesses complimented Mr. Crapo's framework, including Former Acting Federal Housing Finance Agency Director Edward DeMarco, who said that it is a "solid workable foundation" from which to create legislation in housing finance reform.