Partnership to Strengthen Homeownership Act protects the 30 year mortgage, keeps government guarantee but reduces government role in housing through unique private market partnership model

WASHINGTON – Representatives John Carney (DE-AL), John K. Delaney (MD-6), and Jim Himes (CT-4) today introduced innovative housing finance reform legislation, the Partnership to Strengthen Homeownership Act (H.R. 5055). This legislation preserves the 30-year fixed rate mortgage and protects American taxpayers by using private sector pricing to reduce the risk of future bailouts. It shifts the housing finance market away from Fannie Mae and Freddie Mac, and keeps home ownership attainable for working families by strengthening affordable housing programs.

The Partnership to Strengthen Homeownership Act combines the federal government’s unique ability to provide capacity with the private sector’s superior ability to price and analyze risk. Joining Carney, Delaney, and Himes are 9 additional original cosponsors: Rep. Jared Polis (CO-2), Rep. Denny Heck (WA-10), Rep. Bill Owens (NY-21), Rep. Kyrsten Sinema (AZ-9), Rep. Patrick Murphy (FL-18), Rep. Peter Welch (VT-AL), Rep. David Scott (GA-13), Rep. Gregory Meeks (NY-5), and Rep. Bill Foster (IL-13). 

The bill establishes an insurance program through Ginnie Mae whereby it makes available the full faith and credit of the federal government, while protecting taxpayer dollars through adequate private sector capital and accurate pricing of government reinsurance. All government guaranteed single-family and multi-family mortgage-backed securities will be supported by a minimum of 5% private sector capital, standing in a first loss position. The remaining 95% of the risk will be shared between Ginnie Mae and a private reinsurer on a pari passu basis.

The bill winds down Fannie Mae’s and Freddie Mac’s current activities and revokes their charter, but allows them to be sold and recapitalized as entities with different business plans without any of their current unique powers.

“The driving force behind my work on this bill is to keep home-buying affordable by preserving the thirty-year fixed rate mortgage, while protecting taxpayer dollars in the event of another housing downturn,” said Congressman Carney. “We aren’t the first group to try to find a solution to reforming our housing finance system. But we think our proposal has promise because it strikes the necessary balance between public and private sector involvement in the housing market. If we don’t fix the current system, taxpayers continue to be the backstop in case of another crisis, and the thirty-year fixed rate mortgage is in danger.”

“America needs housing finance reform for the long-term health of the economy, the viability of the American Dream of homeownership, and the protection of the U.S. taxpayer. Congress has to act and we are committed to keeping housing finance reform on the agenda,” said Congressman Delaney. “We’ve seen what happens when the housing market becomes distorted and policy fails the public: hard-working Americans lose their homes, the economy slumps and the taxpayer is left responsible. By maintaining a government guarantee, introducing private sector pricing and increased taxpayer protections, our legislation can bring both sides of the aisle together. Neither side has a monopoly on good ideas and I look forward to working with my colleagues and stakeholder groups so that we can stabilize the housing finance market for decades to come.” 

“This legislation ensures that new homeowners will continue to have access to the affordable, predictable financing options they need, while protecting taxpayers and our economy from future downturns,” said Congressman Himes. “Our bill combines the market’s efficiency in pricing risk with government's ability to provide scale to create a safer, more liquid housing market that preserves access to affordable housing for American families.”

The full text of the legislation is available here. More information on the bill can be found here