U.S. Senator Mark Kirk (R-Ill.) today announced his support for the Housing Finance Reform and Taxpayer Protection Act, S. 1217, led by U.S. Senators Bob Corker (R-Tenn.) and Mark Warner (D-Va.) and supported by a bipartisan group of eight members on the Senate Banking, Housing and Urban Affairs Committee. The bill would establish a new housing finance system--one void of the government-sponsored enterprises Fannie Mae and Freddie Mac that take all the private gain while exposing taxpayers to all the risk. Under the proposed legislation, the new housing finance system would be based on a greater reliance on private capital, while shielding taxpayers from loss, and maintaining a liquid mortgage marketplace.
"The Government should not make promises it cannot afford to keep," Senator Kirk said. "Over 95 percent of new mortgages issued in the U.S. are backed by a government guarantee--increasing vulnerability to the American taxpayer of another financial bailout. It is time to mend this unsustainable system that shuts out responsible, private participation and enact a plan that protects the American taxpayer."
"Senator Warner and I are really proud that Senator Kirk has joined the eight of us in this effort to modernize our unstable system of housing finance," Senator Corker said. "The framework we're presenting here will protect taxpayers while maintaining market liquidity, and is the best opportunity we'll have to finally move beyond the failed GSE model of private gains and public losses. Senator Kirk brings a critical eye and sound judgment to the process, and we're all excited about the momentum this bill is gaining."
S. 1217 has already garnered the support of industry stakeholders and individuals and groups focused on housing and has bipartisan support from Banking Committee Members including Senators Mike Johanns (R-Neb.), Jon Tester (D-Mont.), Dean Heller (R-Nev.), Heidi Heitkamp, (D-N.D.), Jerry Moran (R-Kan.) and Kay Hagan (D-N.C.).
The Housing Finance Reform and Taxpayer Protection Act:
Winds down Fannie Mae, Freddie Mac and the FHFA within five years of bill passage.
Mandates 10 percent capital, up front, for the system to protect taxpayers against future bailouts.
Transfers appropriate utility duties and functions to the modernized, streamlined and accountable Federal Mortgage Insurance Corporation (FMIC) modeled in part after the FDIC.
Replaces the failed "housing goals" of the past with a transparent and accountable market access fund that focuses on ensuring there is a sufficient decent housing available. The fund is NOT paid for with tax dollars, but through a small FMIC user fee that only those who choose to use the system pay.
Ensures institutions of all sizes have direct access to the secondary market so local banks and credit unions are not gobbled up by the mega banks when Fannie and Freddie are dissolved.