The Warner/Corker legislation is co-sponsored by six colleagues on the Senate Banking Committee: Sens. Mike Johanns (R-NE), Jon Tester (D-Mont.) Dean Heller (R-Nev.) Heidi Heitkamp (D-ND), Jerry Moran (R-KS) and Kay Hagan (D-NC).

“Housing finance is the last piece of unfinished business remaining after the 2008 economic meltdown,” Sen. Warner said. “We have designed thoughtful reforms that will protect taxpayers from future downturns while responsibly preserving the availability of the 30-year fixed-rate mortgage for homebuyers. We believe the housing market is ready for reforms like this, and the private sector has been waiting for new rules of the road.”

“Five years after the financial crisis, it is past time for us to modernize our unstable system of housing finance,” Sen. Corker said. “The framework we’re presenting here will protect taxpayers while maintaining market liquidity, and is the best opportunity we’ll have to finally move beyond the failed GSE model of private gains and public losses.”

In 2008, Fannie Mae and Freddie Mac received a $188 Billion bailout from taxpayers and were taken into government conservatorship to stay afloat. As a result of that bailout, the private market has almost completely disappeared and nearly every home loan made in America today comes with an implicit government guarantee.  Despite this unsustainable situation, there has still been no real reform to our housing finance system since the financial crisis.

The Housing Finance Reform and Taxpayer Protection Act:

• Mandates 10 percent capital, up front, for the system to protect taxpayers against future bailouts.  

• Winds down Fannie Mae, Freddie Mac and the Federal Housing Finance Agency (FHFA) within five years of bill passage.

• Transfers appropriate utility duties and functions to the modernized, streamlined, accountable Federal Mortgage Insurance Corporation (FMIC), modeled in part after the FDIC.

• Replaces the failed “housing goals” of the past with a transparent and accountable market access fund that focuses on ensuring there is sufficient affordable housing available for lower and middle-income buyers. The fund is NOT paid for with tax dollars, but through a small FMIC user fee that only those who choose to use the system would pay.

• Ensures institutions of all sizes have direct access to the secondary market so that smaller local banks and credit unions are not gobbled up by the megabanks when Fannie and Freddie are dissolved.

Sens. Warner and Corker have reached across the aisle to partner together on other significant financial reform legislation. During the Banking Committee’s work on Wall Street reform legislation, Sens. Warner and Corker were the lead authors of important provisions which tightened oversight and raised capital requirements for large, interconnected financial companies, requiring these financial firms to prepare “pre-need funeral plans” that force bankruptcy instead of any expectation of a taxpayer bailout.  

The bill is drawing broad support from stakeholders and industry experts:

• “This legislation is a very serious effort to fix our broken mortgage finance system. If it becomes law, it will significantly reduce government’s role in housing and ensure that a broad number of American households will have access to safe 30-year fixed rate mortgages.” – Mark Zandi, chief economist at Moody’s Analytics

• “On behalf of 1 million members of the National Association of REALTORS®, I would like to thank Senators Corker, Warner, Johanns, Tester, Heller, Heitkamp, Hagan and Moran for taking the first step to begin a substantive discussion of housing finance reform. We believe that the framework outlined in the ‘Housing Finance Reform and Taxpayer Protection Act’ contains the necessary building blocks for establishing a new housing finance system for today and tomorrow… Though there are issues that remain to be addressed, this bipartisan legislation will accelerate the conversation necessary to reform our housing finance system.” – Gary Thomas, president of the National Association of REALTORS®

• “This bi-partisan legislation is a positive first step in what is certain to be a long process toward creating a sustainable, rational and limited role for the federal government in supporting and regulating a mortgage market that is appropriately and predominately filled by the private sector… The mortgage market is a complex and intricate part of our nation’s economy and addressing the many concerns and interests of a wide range of participants will require much negotiation, compromise and cooperation.  There is much work yet to be done, but this bill is a strong foundation on which to begin the process.” – Frank Keating, president and CEO American Bankers Association

• “We applaud Senators Bob Corker and Mark Warner, along with Sens. Tester, Johanns, Heitkamp and Heller, for their leadership in crafting comprehensive legislation that would overhaul the government sponsored enterprises (GSEs) Fannie Mae and Freddie Mac, and the U.S. housing finance system. This legislation is an important step in the debate on GSE reform that we believe should begin in earnest. We look forward to participating in the discussions to reform the mortgage finance system as the bill moves forward.” – Rick Judson, chairman of the National Association of Home Builders and a home builder from Charlotte, N.C.

• “We commend Senators Corker and Warner for introducing this important bipartisan legislation. We are grateful for their hard work and thoughtfulness, and hope the introduction of their legislation signals a renewed focus in Congress to repair our nation’s broken system of housing finance. The stakes are high. As we approach the fifth anniversary of the government’s takeover of Fannie Mae and Freddie Mac, the government dominates the housing market in a way never seen before in our nation’s history. Today, the government touches more than 90 percent of mortgages. This government-dominated status quo is undesirable and unsustainable and exposes taxpayers to unnecessary risk.” – former Senate Majority Leader George Mitchell, former Senator and HUD Secretary Mel Martinez, former HUD Secretary Henry Cisneros, and former Senator Christopher “Kit” Bond, co-chairs of the Bipartisan Policy Center’s (BPC) Housing Commission

A section-by-section summary is available. The full text of the bill is below:

GSE Reform Section by Section by Mark Warner