Heritage Agrees With Schumer on Housing Finance Reform
By Norbert Michel
Washington DC is abuzz now that Senators Tim Johnson (D–S.D.) and Mike Crapo (R–Idaho) have completed a bill to finally eliminate Fannie Mae and Freddie Mac. But Senator Chuck Schumer’s (D–N.Y.) statement is completely correct in that “if there was ever a bill where the devil was in the details, this is it.”
As Heritage has noted in the past, the Crapo-Johnson bill is based on the Corker-Warner bill, a proposal introduced in the Senate last June. The full details haven’t yet been released, but The Wall Street Journal is reporting that:
The plan, by Senate Banking Committee leaders Tim Johnson (D., S.D) and Mike Crapo (R., Idaho), calls for replacing Fannie and Freddie with a new system of federally insured mortgage securities in which private insurers would be required to take initial losses before any government guarantee would be triggered.
This scheme is exactly what’s in Corker-Warner: create a new government entity to explicitly back at least 90 percent of mortgage losses. So Fannie and Freddie will disappear, but the Federal Mortgage Insurance Corporation will take over their guarantees. And there won’t be an implicit government backing of losses; there’ll be an explicit promise to cover at
Read more here: The Foundry
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