Rep. Maxine Waters, D-Calif., unveiled a new plan Thursday to overhaul the housing finance market, entering what's becoming a crowded field of proposals to restructure the mortgage system.
The discussion draft, titled the Housing Opportunities Move the Economy Forward Act, would unwind Fannie Mae and Freddie Mac, like many of the competing plans in both the House and Senate. Unlike the other bills, the Waters proposal would replace the government-sponsored enterprises with a new lender cooperative that would issue government-backed securities. It would also establish a new regulator, the National Mortgage Finance Administration, to oversee the cooperative and the Federal Home Loan Banks.
"Fannie Mae and Freddie Mac's return to profitability and repayment of taxpayer dollars has led some to rightly speculate whether the enterprises need any reform at all," said Waters, the ranking member on the House Financial Services Committee, in a press release. "I believe that we have an opportunity to address some of the fundamental flaws of the current system, by ending the perverse incentives created by Fannie Mae and Freddie Mac's ownership structure and providing an explicit government guarantee that is paid for by industry."
The Waters plan follows on the heels of two bills that have been discussed at length by the Senate Banking Committee, first by Sens. Bob Corker, R-Tenn., and Mark Warner, D-Va., and then by Chairman Tim Johnson, D-S.D., and Mike Crapo, R-Idaho, the panel's ranking member, which builds on the Corker-Warner bill.
The Johnson-Crapo bill, which is expected to soon come up for a committee vote, also gets rid of the GSEs, though it establishes a new regulator, the Federal Mortgage Insurance Corp., that would issue government-backed securities.
Under the Waters plan, a lender-owned cooperative would issue mortgage securities backed by the government. It would be governed on a one-member, one-vote basis to benefit smaller institutions and would "align risk and incentives across private members," according to a summary of the bill.
"The new issuer will no longer operate as a hedge fund with a leveraged portfolio, but instead with very limited authority to provide a 'cash window' to small financial institutions, aggregate loans from the smallest lenders into multi-lender securities, and work out troubled loans," the summary adds.
Like the Johnson-Crapo bill, the Waters plan would eliminate the GSEs' affordable housing goals and capitalize several housing trust funds with a user fee of 10 basis points. On top of the trust funds, the Waters legislation includes a broad mandate to serve rural and other underserved communities.
Still, while the legislation may appear most similar in construct to the pending Johnson-Crapo bill, it has some competition in the House as well.
House Financial Services Chairman Rep. Jeb Hensarling, R-Texas, unveiled a bill last summer that would unwind the GSEs but would not establish a government guarantee for the new housing finance market. The legislation narrowly passed out of the banking panel with a vote largely down party lines. It has not yet been brought to a floor vote, which some suggest is due to a division in the Republican caucus over the approach.
Meanwhile, several junior Democrats on the House banking panel are also said to be working on a plan based on a mortgage reinsurance system organized around Ginnie Mae.