The Senate Committee on Banking, Housing and Urban Affairs will hold a March 19 hearing on bipartisan solutions for housing finance reform. The hearing’s witnesses will be former HUD Secretary and Senator Mel Martinez (R-FL), Co-Chair of the Bipartisan Policy Center’s Housing Commission; and Janneke Ratcliffe of the Center for American Progress. The Housing Commission released Housing America’s Future: New Directions for National Policy on February 25 (see Memo, 3/1). “Meeting our nation’s diverse housing needs requires a strong and stable housing finance system,” the commission’s report says. The commission concludes that, given the size of the U.S. mortgage market, where outstanding mortgage debt nearly equals the total value of assets on banks’ books, the secondary market for mortgage-backed securities must continue to play a critical role in providing mortgage liquidity.”The commission recommends replacing Fannie Mae and Freddie Mac with an independent, wholly government corporation, the “Public Guarantor,” that would provide a limited catastrophic government guarantee for both the single-family and rental markets. The Public Guarantor would differ from today’s Fannie Mae and Freddie Mac in that it would not buy or sell mortgages or issue mortgage-backed securities; it would simply provide last-resort guarantee for those investing in those securities. The government would thus be in a fourth-loss position behind borrowers and their home equity, private credit enhancers, and the corporate resources of the mortgage-backed security issuers and servicers. Referring specifically to rental housing, the commission’s report is clear that federal support from Fannie Mae, Freddie Mac and the Federal Housing Administration (FHA) are essential to the nation’s recovery process and the housing market’s long-term stability. The report also notes the important and profitable role Fannie Mae and Freddie Mac’s multifamily business had during the financial crisis, as well as the importance of the Federal Home Loan Banks’ reliable source of liquidity for housing and community development lending during this time. The commission recommends gradually transitioning the multifamily operations of Fannie Mae and Freddie Mac to a new system similar to the one recommended for single-family finance with a catastrophic guarantee. The commission also recommends retaining a streamlined version of the FHA’s multifamily insurance operations to allow for greater private sector involvement to “enable FHA to focus on areas and products where private investment is not readily available.” Finally, the commission recommends greater attention to the financing needs of one- to four-unit and five- to 49-unit rentals.The committee hearing will be at 10am in room 538 of the Dirksen Senate office building.