As lawmakers weigh options for reforming our housing finance system, financing for rental units often remains an afterthought. In order to ensure that our nation’s renters are adequately served, the Mortgage Finance Working Group—convened by Center for American Progress—proposes a set of concrete steps that would transition us to a new system. This proposal is designed to be compatible with the growing bipartisan consensus over the federal government’s future role in the mortgage market. This consensus envisions the government providing a “catastrophic” or last-resort guarantee on mortgage-backed securities, meaning that private capital would take losses before the government. In most plans, this guarantee is paid for by a fee on securities that receive it and is administered by the federal government through an insurance fund. The fund will also regulate any entities that utilize the government guarantee. The transition steps are as follows:
- Spin off the current multifamily operations at Fannie Mae and Freddie Mac into two private entities that are initially owned by the federal government.
- Establish a separate insurance fund for qualifying multifamily mortgage-backed securities within the government insurance fund.
- After approval from the regulator, allow other private issuers of qualifying multifamily securities to purchase government catastrophic insurance.
- Establish a minimum affordability threshold and other requirements for any issuer of government-backed multifamily securities.
- Require private entities to pay a fee on multifamily securities to fund the Housing Trust Fund and the Capital Magnet Fund.
- Establish the government insurance fund as the regulator of the entire secondary multifamily mortgage market.
For more on this topic, please see:
- Transitioning to a New System for Multifamily Finance by The Mortgage Finance Working Group