The Johnson-Crapo bill to overhaul the U.S. housing finance market has bipartisan support, but policy experts within those ranks differ on how the proposal can be improved.
The proposal would wind down Fannie Mae and Freddie Mac and replace them with a new guarantor to backstop mortgage-backed securities. A key point of contention is the 10 basis point user fee that the proposed Federal Mortgage Insurance Corp. would charge to support the affordable housing efforts of the National Housing Trust, Capital Magnet, and Market Access funds.
"This 10 basis point fee ain't nothing but a tax," declared Robert Couch, an attorney at the Bradley Arant Boult Cummings law firm and a member of the Bipartisan Policy Center's Housing Commission.
"It's a regressive tax on homeowners…under the guise of access to credit, but it's not anything about access to credit," said Couch, who previously served as general counsel for the Department of Housing and Urban Development and president of Ginnie Mae in the George W. Bush administration.
Noting the proposed fee is significantly higher than the 4.2 basis point fee created by the Housing and Economic Recovery Act of 2008 to support the National Housing Trust Fund (which the Federal Housing Finance Agency never imposed), Couch warned that homeowners will be priced out of the market.
"A hundred thousand to 250,000 borrowers will not qualify for loans because their interest rate will go up by 10 basis points," Couch estimated. He made his remarks at National Mortgage News' Eighth Annual Mortgage Servicing Conference, ongoing this week in Dallas.
But Barry Zigas, another member of the BPC's Housing Commission and the director of housing policy at the Consumer Federation of America, dismissed that notion. Already, he said at the conference, a borrower's interest rate can swing by 25 basis points due to changes in market conditions and investor pricing.
And John Dalton, former Ginnie Mae president during the Carter administration and Navy secretary during the Clinton administration, called the affordable housing provisions crucial to sustaining support from Congressional Democrats and maintaining momentum for the bill's passing.
"I am in favor of getting something done and in order to get something done, there has to be some give and take on both sides of the aisle," said Dalton, who's currently president of the Housing Policy Council at the Financial Services Roundtable. "Even if I were not for [the affordable housing fee], I would be in favor of it to get the process moving forward."
There's a sense of urgency to move forward with housing finance reform legislation because the current level of government support of the market is unsustainable in the long-term and puts taxpayers at an unacceptably high level of exposure in the event of another housing crisis, Dalton said.
"It is not a perfect bill...but we believe the Johnson-Crapo proposal presents the best option for bipartisan housing finance reform," he said at the conference.
Johnson-Crapo has support from 12 Senate Banking Committee members across both parties, enough to clear the panel, but needs more lawmakers on board to make it to the full Senate.
"If we could get a few more senators to agree to support that, I believe it is highly likely we could move forward and get a bill passed in the Senate," Dalton said.
While HUD Secretary Shaun Donovan is rallying support for the bill, opposition to the proposal focuses on claims that it would expand, not reduce, the government's involvement in the housing market. But if Johnson-Crapo could get more than 60 votes in the Senate, Dalton predicted the House would look seriously at a conference committee to pass housing finance legislation in 2015.