The New York Times reports that Representative Maxine Waters submitted a proposal for winding down Fannie Mae and Freddie Mac.
This is not the first proposal submitted attempting to overhaul the nation’s housing finance system.
The new system that is being proposed would make the lending system more like a public utility.
Read The New York Times article: Proposed Housing Bill Would Create a Co-op of Mortgage Lenders.
The major distinction of Ms. Waters’s proposal is that it would make the mortgage lending system more like a public utility, by creating a co-op of lenders that would be the sole issuer of mortgage-backed securities guaranteed by the government. Such a system would significantly differ from those proposed by the major bills in the Senate, which would allow banks and bond guarantors to participate independently in the market. Both Ms. Waters’s proposal and the Senate ones would establish a new federal regulator.
The Waters bill would require private backers to take the first 5 percent loss before the government guarantee kicks in. By contrast, the latest Senate bill, by the Senate Banking Committee’s chairman, Tim Johnson, a Democrat from South Dakota, and Mike Crapo of Idaho, the committee’s ranking Republican, requires private capital to take the first 10 percent loss.
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