The Mortgage Bankers Association unveiled a new housing finance reform plan on Tuesday designed to kick-start congressional discussions over what to do with Fannie Mae and Freddie Mac.
The thrust of the plan would create a system with multiple privately owned utilities that act as "guarantors" for mortgages. Those firms could in turn buy an explicit federal guarantee from a proposed government insurance fund for eligible securities that they would issue. Under the plan, the securities would be federally guaranteed, but the companies would not be.
"Today's paper is intended to provide thoughtful recommendations on how to reform the [government-sponsored enterprises] while ensuring a healthy, robust secondary mortgage market emerges for both single-family and multifamily mortgages," said Rodrigo Lopez, executive chairman of NorthMarq Capital and chairman of the MBA, in a press release.
Housing finance reform discussions have moved in fits and starts since Fannie and Freddie were seized by the government and put into conservatorship during the financial crisis.
But reform talks are heating up again this year as the new administration has pledged to tackle the issue and the government-sponsored enterprises are projected to run out of capital by the end of next year.
The MBA's decision to weigh in with its own plan is a clear sign that they believe the dynamics that hampered previous attempts to find a permanent solution have changed.
The trade group listed the availability of the 30-year fixed-rate mortgage and a deep liquid market for single-family loans as top priorities, but acknowledged that achieving those goals without putting taxpayer dollars at risk is difficult.
The MBA said its proposed insurance fund would be funded by premiums from the guarantors, who would have a regulated rate of return. The guarantors would also have mandated affordable housing goals.
The MBA's plan builds on steps the Obama administration took to create a Common Securitization Platform that would allow for guarantors to issue a single security rather than two competing securities.
"This paper was developed with an eye toward serving the broadest range of housing options, and thus includes both single- and multifamily approaches for homeowners and renters," said Mike May, executive managing director at Berkeley Point Capital.