Washington, D.C. — Today House Financial Services Committee Chairman Jeb Hensarling (R-TX) released a detailed outline of a bill to reform the entire housing-finance system, including Fannie Mae, Freddie Mac, and the Federal Housing Administration, or FHA. Julia Gordon, Director of Housing Finance and Policy at the Center for American Progress, issued the following reaction:
Chairman Hensarling has released the ultimate right-wing wish list, turning the entire mortgage market over to Wall Street lock, stock, and barrel. It’s a politically motivated sideshow that ignores the general consensus forming around the government’s role in a responsible market and threatens not only the nascent housing recovery but also prospects for overall economic growth.
If enacted, Chairman Hensarling’s legislation would eliminate the 30-year fixed-rate mortgage; put homeownership out of reach for millions of young borrowers, communities of colors, and low-wealth families; further constrict the already-inadequate supply of affordable rental housing; and leave the housing market fully exposed to the private market’s cyclical fluctuations. This is not a serious legislative proposal. Rather, House Financial Services Committee Republicans are filing a PAC fundraising letter with the clerk of the House.
Chairman Hensarling’s legislation would wind down Fannie and Freddie within five years, completely eliminate the government backstop to the mortgage market, and replace it with nothing more than a public utility-securitization mechanism featuring standardized contracts and disclosures. It also would eviscerate the FHA, dramatically cutting back on government insurance, limiting eligibility to first-time and lower-income homebuyers, and instituting higher down-payment requirements.
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