A bipartisan, pragmatic roadmap to fix broken housing finance system while protecting taxpayers
Nearly five years have passed since taxpayers bailed out Fannie Mae and Freddie Mac, the entities at the heart of our nation’s broken housing finance system. Despite broad bipartisan agreement that the system needs to be fixed, Congress has yet to act.
As I’ve traveled across our state in the wake of the financial crisis, I’ve talked to too many middle-class families who have struggled to stay in their homes and keep their heads above water. I’ve talked to too many mothers and fathers who have had to choose between a roof to sleep under and a meal on the table for their kids. I’ve talked to too many men and women who’ve picked up second or third jobs just to keep a foreclosure notice off their front door.
Hardworking North Carolinians shouldn’t have to make these impossible decisions. We can do better. We must do everything we can to prevent a repeat of the 2008 crisis that devastated our country, and a plan to fix the broken housing finance system would be a step in the right direction.
To that end, I’ve introduced bipartisan legislation with ten colleagues on the Senate Banking Committee—five Republicans and five Democrats—that offers a pragmatic roadmap to strengthen the housing finance system, protect taxpayers from another bailout and ensure homeownership remains within reach for qualified families.
Under the bill, Fannie and Freddie would be dissolved within five years. Their assets would be sold. Their functions would be transferred to a modern, streamlined agency, which would be modeled after the Federal Deposit Insurance Corporation and would provide effective oversight of mortgages backed by the new agency.
Not only would this legislation strengthen the system by winding down Fannie and Freddie, but it would also protect taxpayers against future bailouts. Our proposal would mandate that private market participants suffer the first ten percent of losses on mortgage pools backed by the new agency.
Instead of the old system that allowed the private sector to profit while shifting losses to taxpayers, our bill protects North Carolina taxpayers from taking the hit if something goes wrong.
A strong housing finance system that does not jeopardize taxpayers would also allow qualified North Carolinians to obtain a mortgage with terms that they can afford and ensure quality housing for renters. Our bill would preserve the 30-year fixed-rate mortgage that has allowed millions of families to purchase a home. It also would establish a transparent and accountable market access fund to keep rental housing affordable that includes a program to build, preserve and rehabilitate rental homes that are reasonably priced for low-income families.
Furthermore, the legislation would ensure that credit unions and banks of all sizes have direct access to secondary capital markets so they can offer affordable mortgages to qualified North Carolinians in every corner of our state. This is incredibly important in North Carolina where we have a vibrant network of community banks that have served our families well for decades.
Our pragmatic proposal, which has been praised by independent experts, provides a solid starting point to fix the broken housing system, protect North Carolina taxpayers from another bailout and keep homeownership within reach for qualified borrowers. I will continue to seek input from North Carolinians and work with my colleagues to advance bipartisan legislation that transforms the status quo and charts a new, stable future for the housing finance system.