Leaders on the Financial Services Committee today announced the PATH Act -- the Protecting American Taxpayers and Homeowners Act -- to create a sustainable housing finance system. The proposal:
- ends the taxpayer-funded bailout of Fannie Mae and Freddie Mac and phases out the troubled Government-Sponsored Enterprises within five years;
- increases competition by ending the federal government's domination of the
housing finance market that has left taxpayers liable for $5.1 trillion in mortgage guarantees; and
- gives consumers more choices in determining which mortgage product best suits their needs.
"House Republicans are committed to fixing the failed housing finance system that required the biggest taxpayer-funded bailout of all time -- nearly $200 billion for Fannie Mae and Freddie Mac. America needs a housing policy designed for homeowners and taxpayers -- not for Wall Street and the housing industry. America needs a housing policy designed to give every American who works hard and plays by the rules both opportunities and choices to buy a home they can actually afford to keep," said Financial Services Committee Chairman Jeb Hensarling (R-TX). "Our plan helps taxpayers and homeowners. It gives power and control back to consumers. Under the current broken system, unaccountable Washington elites have more of a say over who gets a mortgage than your local bank. The current system is a government monopoly run by the same types of Washington bureaucrats who run the IRS. America can do better. Americans deserve better."
Rep. Scott Garrett (R-NJ), who serves as Chairman of the Capital Markets and Government Sponsored Enterprises Subcommittee, said, "Approximately five years ago our nation was hit with an unprecedented financial crisis. I am pleased that we are continuing the process of addressing the core cause of it -- the government's misguided efforts at allocating mortgage credit through Fannie Mae and Freddie Mac. I compliment Chairman Hensarling on his terrific work on this legislation and his diligent efforts in reaching out to Members of Congress and industry stakeholders to incorporate many of the ideas and suggestions that others had to offer. This legislation will finally end the largest bailout in history and will put our country back on a path to a sustainable housing finance market that benefits both taxpayers and homebuyers."
Rep. Randy Neugebauer (R-TX), Chairman of the Housing and Insurance Subcommittee, said, "After multiple hearings and conversations with stakeholders, the committee has created a framework for a dynamic, healthy, and stable housing market. Our proposals would allow the housing finance market to function without the unprecedented government intervention we have seen in recent years. We'll also reduce the probability of the boom and bust cycles that have hurt our economy and American families. The result will be a sustainable housing finance system that will benefit homeowners, taxpayers, and investors. I'm grateful for Chairman Hensarling's leadership on this important issue, and I look forward to discussing these proposals with my colleagues."
Rep. Shelley Moore Capito (R-WV), Chairman of the Financial Institutions and Consumer Credit Subcommittee, said, "Today we begin the very important discussion and debate on how we can create a better, more sustainable housing finance system that relies on the private sector. American consumers are best served when the federal government does not control the market. We need a sustainable system that puts the interest of taxpayers and homebuyers first."
Witnesses Testify on Need for Sustainable Reforms
Over the past five months, the Financial Services Committee has held 11 hearings and heard from 41 witnesses on the failures of the current housing finance system and the need to create a sustainable housing finance model.
Many of these expert witnesses noted that the financial crisis that began in 2008 started with failed Washington housing policies and Fannie Mae and Freddie Mac. While their senior executives engaged in financial fraud so they could receive hundreds of millions of dollars in bonuses, these Government-Sponsored Enterprises exploited their government guarantee to take on enormous risk. When the housing bubble burst, Fannie and Freddie received the biggest bailout in history, nearly $200 billion courtesy of hardworking taxpayers. The Dodd-Frank Act, passed by a Democratic Congress and signed by President Obama in 2010 in response to the crisis, did nothing to reform the GSEs. In fact, witnesses said Dodd-Frank compounds the government's disastrous foray into housing policy through onerous regulations that hobble the private mortgage market and lock out thousands -- if not millions -- of qualified borrowers who will be unable to obtain an affordable mortgage.
Committee to Discuss Reform Plan Next Week
Chairman Hensarling also announced today the Financial Services Committee will meet on Thursday, July 18 to hold a hearing on the Protecting American Taxpayers and Homeowners Act.
"Ours is an ambitious vision and a real plan to reform and fix a broken, failed system. The Obama administration has had five years and has failed to offer any plan at all. It's time for action," said Chairman Hensarling.