Rep. Gary Miller, R-Calif., has drafted a GSE reform bill that would merge Fannie Mae and Freddie Mac and convert them into a secondary market utility that issues government-backed mortgage securities.

This privately capitalized utility would be regulated by the existing Federal Housing Finance Agency, which would ensure its market share doesn’t exceed 50% of the mortgage market, according to the Wall Street Journal.

Co-sponsored by Rep. Carolyn McCarthy, D-N.Y., the bill appears to straddle two goals -- creating a purely private section of the mortgage market and ensuring equal access to the government-backed secondary market for all lenders regardless of size.

The Independent Community Bankers of America (ICBA) fears the mega-banks will dominate the mortgage market if Congress does not come up with an appropriate structure to replace the GSEs. 

At a recent Senate Banking Committee hearing, Jack Hartings, president of Peoples Bank Co., testified that ICBA does not want Fannie and Freddie to be replaced by another entity that offers better pricing to the largest lenders. 

"I urge this committee to reject any proposal that does not provide equal representation to community banks and lenders of all sizes," he said.

Reps. Miller and McCarthy have scheduled a Thursday afternoon press conference to discuss their bill.

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