House Financial Services Committee Chairman Jeb Hensarling, R-Texas, again took up the mantle of housing reform, this time laying out reform principles he could support, in a Dec. 6 speech.
In his speech, Hensarling advocated that Fannie Mae and Freddie Mac should be wound down and their charters repealed, and he said any new government affordable-housing program should be on-budget, results-based and target homebuyers with homes they can afford. He promised he would work on a bipartisan basis toward housing reform if it included those key principles, among others.
Hensarling said the stakes are high if lawmakers cannot pass housing reform for government-sponsored enterprises like Fannie Mae and Freddie Mac, with consequences ranging from unaffordable housing to economic catastrophe.
"It cannot be saved, it cannot be salvaged, it must not be resurrected and needs to be scrapped," he said.
He reiterated his support for the PATH Act, a bill that previously failed to pass, but acknowledged that he did not see its passage in the current environment as likely. Instead, he focused on guiding principles for any proposed housing finance reform, which included the winding down of Fannie Mae and Freddie Mac, as well as requirements that mortgage securitizers would carry strong capital and that the Federal Housing Administration focus on serving first-time homebuyers and low- and moderate-income individuals. He also added that government guarantees should be limited to catastrophic losses only and should consolidate existing structures rather than duplicate them.
He said he was "particularly encouraged" by the reform proposal from former Federal Housing Finance Agency Acting Director Ed DeMarco and current Ginnie Mae Acting President Michael Bright. The proposal would provide a new explicit government guarantee for mortgages by authorizing Ginnie Mae to accept mortgages with non-government credit enhancements from the private sector. He said Ginnie Mae's existing framework and government guarantee would allow it to accept privately insured mortgages and entice private guarantors to manage risk before taxpayers provide a bailout.