House Panel Marks up GSE Bill, NHTF Would be Eliminated

The House Committee on Financial Services held a markup of H.R. 2767, the Protecting American Taxpayers and Homeowners (PATH) Act, on July 23. The legislation, commonly referred to as the “Hensarling Bill” after Committee Chair Jeb Hensarling (R-TX), was formally introduced by Financial Services Subcommittee on Capital Markets and Government Sponsored Enterprises Chair Scott Garrett (R-NJ). The Committee previously held a hearing on a discussion draft of the bill on July 18 (see Memo, 7/19). As part of the privatization of the current housing finance system, the bill would call for an elimination of the National Housing Trust Fund (NHTF) and the Capital Magnet Fund, which were initially authorized in the Housing and Economic Recovery Act (HERA) of 2008, and were to be funded by the government sponsored enterprise (GSEs) Fannie Mae and Freddie Mac. Neither Fannie nor Freddie would exist if the bill is enacted.The vast majority of discussion during the more than eight hour markup was about the impact the bill would have on the ability of borrowers to qualify for the 30-year fixed rate mortgage and the causes of the financial crisis. Democrats on the Committee rejected the approach in H.R. 2767, instead advocating for the approach laid out in the Corker-Warner GSE reform bill introduced in the Senate (see Memo, 6/28).A number of amendments were offered and voted on, including one offered by Representatives Keith Ellison (D-MN), Dan Kildee (D-MI), Bill Foster (D-FL), Gwen Moore (D-WI), Al Green (D-TX), and Joyce Beatty (D-OH) to restore funding to the NHTF and the Capital Magnet Fund. The amendment specifically would call for the new mortgage securitization utility established by the bill to apply a fee of 4.2 basis points for every dollar for use of the Utility. Of the funds received, 65% would go to the NHTF and 35% would go to the Capital Magnet Fund—the same split as authorized in HERA. The amendment failed on July 24 by a vote of 25 to 32. In offering the amendment, Mr. Ellison said “the National Housing Trust Fund is a big deal for my district. More than 80% of extremely low income renters are severely housing cost burdened.” Earlier in the markup, Ms. Moore had noted that every member of the Committee had a shortage of housing affordable and available to extremely low income people—not just the Committee Democrats.Chair Hensarling said in the amendment debate that “the best affordable housing program is a job.” He also said, “Regrettably the National Housing Trust Fund was built around the GSE model. The GSE model has failed.” Mr. Garrett said, “The second best affordable housing program is affordable housing, but instead of creating new investments we should be keeping prices down.”Committee Ranking Member Maxine Waters (D-CA) said many people “work every day but earn very little money, and earn just the minimum wage.” Ms. Waters added, “There may be very little sympathy for families, two of them working, saving very little but they’re paying their bills, they’re paying their rent, but somehow these people are not worthy. Now we have the National Housing Trust Fund. Housing finance reform must have access to affordable homes for low income people and must greatly increase investment in rental housing.” Ms. Waters also said that homelessness is growing in rural communities and among families, and she does not understand how members can oppose the National Housing Trust Fund. Mr. Kildee said that even before the housing and economic crisis, there was a “class of Americans without decent, affordable homes available to them.” Representative Mick Mulvaney (R-SC) spoke about his support for affordable housing, and his family’s business of building affordable workforce housing. Mr. Kildee responded that while there is a need for workforce housing and new development in places like Flint, MI, there will still be a sector of the community that will not be able to afford that type of housing. Mr. Mulvaney voted against the Ellison amendment. The bill was approved, as amended, by the full Committee on July 24 by a vote of 30 to 27. Two Republicans, Representative Gary Miller (R-CA) and Michael Fitzpatrick (R-PA), and all Democrats voted against the bill. A floor vote on the PATH Act has not yet been scheduled. Watch an archived markup webcast: http://1.usa.gov/1dSkNcW View the text of H.R. 2767 at: http://1.usa.gov/18zvwsj View the text of the Ellison amendment at: http://1.usa.gov/12Tq4MB