Alternative GSE bill proposedStructured Credit Investor
17 July 2014
Democrats in the US House of Representatives have proposed a bill to wind down the GSEs and provide an explicit government guarantee while increasing private sector participation in the market. The Partnership to Strengthen Homeownership Act has been proposed by John Delaney, Jim Himes and John Carney.
SFIG notes that the bill would preserve the 30-year fixed rate mortgage and protect American taxpayers by using private sector pricing to reduce the risk of future bailouts. The private sector would be required to take a 5% first-loss position on guaranteed RMBS, while the remaining 95% would be shared between Ginnie Mae and a private reinsurer.
The bill would wind down Fannie Mae's and Freddie Mac's current activities and revoke their charter, so they could be sold and recapitalised as entities with different business plans but without their current powers. While the proposed Johnson-Crapo housing finance reform bill remains stuck in the Senate, the new plan will be discussed with the House Financial Services Committee and other lawmakers.