The House Committee on Financial Services held a hearing on the “Protecting American Taxpayers and Homeowners (PATH) Act of 2013” on July 18. The legislation, which has not been formally introduced, would fully wind down the government sponsored enterprises (GSEs) Fannie Mae and Freddie Mac, and privatize the current housing finance system (see Memo, 7/12). The bill would eliminate the National Housing Trust Fund, the Capital Magnet Fund, and current GSE affordable housing goals.
A full Committee markup of the bill has been scheduled for July 23 at 10:15 am to be held in room 2128 of the Rayburn House office building.
Unlike the Senate, where bipartisan GSE reform legislation has been introduced by Senator Bob Corker (R-TN) and Senator Mark Warner (D-VA) (see Memo, 6/28), the House bill has been crafted by conservative Republican members of the Financial Services Committee, including Chairman Jeb Hensarling (R-TX). As of yet, no bipartisan or Democratic legislation has been introduced in the House. The Corker-Warner bill includes a version of the NHTF.
In advance of the hearing, the Democrats on the Financial Services Committee released a set of principles for GSE reform, which call for the NHTF to be included in any future housing finance system. They “will oppose any legislation that is inconsistent with these principles.”
The key principles are:
- Maintain the 30-year fixed rate mortgage;
- Protect taxpayers;
- Provide stability and liquidity;
- Prevent disruptions to the U.S. Housing market during a transition to a new finance system;
- Require transparency and standardization;
- Maintain access for all qualified borrowers that can sustain homeownership and serve homeowners of the future; and
- Ensure access to rental housing.
The document expands upon each of the principles. Within the rental housing portion of the document, the Democratic Committee members state that any housing finance reform bill must:
- “Ensure a stable and liquid secondary mortgage market for loans secured by multi-family residential properties,” and
- “Support affordable housing by funding the National Housing Trust Fund and the Capital Magnet Fund, and secure that funding is appropriately targeted to very low and extremely low income families.”
A significant portion of the more than six hour hearing focused on how the PATH Act would affect access to 30-year fixed rate mortgages, as well as the bill’s proposed reforms to the Federal Housing Administration (FHA).
Some questions pertained to affordable housing. Representative William Lacy Clay (D-MO) asked whether it would be wise to make such a dramatic change to the affordable housing functions of the GSEs at this time. Witness Adam Levitin of Georgetown Law School said that policymakers should rethink the affordable housing goals, but that an evaluation is not the same as getting rid of them entirely. Mark Calabria of the Cato Institute responded that he thinks affordable housing activities should be funded through the appropriations process, but acknowledged current budget constraints.
Several representatives including Committee Ranking Member Maxine Waters (D-CA) asked how the changes in the bill will affect FHA’s multifamily activities. Ms. Waters said they would make the multifamily housing more like the Section 8 program, and would bog them down with “onerous rules that I’ve been trying to get relief from in Section 8 reform legislation.”
Representative Mel Watt (D-NC) joined the hearing, which occurred shortly after Mr. Watt’s nomination to the position of Federal Housing Finance Agency (FHFA) Director was approved by the Senate Committee on Banking, Housing, and Urban Affairs (see article below in Memo) and commended Committee Chair Jeb Hensarling (R-TX) on “starting this discussion which is long overdue.”
An archived hearing webcast and all witness testimony are available at: http://1.usa.gov/15mshBR
Read the Democratic reform principles at: http://1.usa.gov/15PabL7