Reps. Ed Royce (R-Calif.) and Gwen Moore (D-Wis.) have introduced the Taxpayer Protections and Market Access for Mortgage Finance Act of 2016 (H.R. 6487), a bill “[t]o require Fannie Mae and Freddie Mac to engage in credit risk transfer transaction, and for other purposes.”
The aim of the bill, according to a new release from Royce’s office, is to require the government-sponsored enterprises (GSEs) to increase credit risk transfers (CRT) with the private sector.
“Growing private sector participation in the secondary housing market reduces taxpayer exposure to future losses. Congress should encourage Fannie and Freddie to increase the amount and the types of credit risk transfer transactions to the maximum level that is economically and commercially viable. Doing so is not only compatible with housing finance reform, it eases the way for future action,” Royce stated.
According to the text of the bill, within 12 months of its enactment, the Federal Housing Finance Agency (FHFA) director will “after taking into consideration market conditions and the safety and soundness of the enterprises, establish guidelines requiring that each enterprise engage in significant and increasing credit risk-transfer transactions.”
The bill also includes changes to commodities rules which allow the use of credit-linked notes to transfer risk from the GSEs to the private sector and amends existing securities and tax laws to allow real estate investment trusts (REITs) to invest in GSE credit risk bonds. The bill establishes two pilot programs to increase risk sharing transactions with small lenders and mortgage insurers.
In a released statement, Moore said that the bill “builds on good work the FHFA has done in housing finance.
“Together, I am confident we will collectively pave the way for a stronger, more stable housing market for all Americans,” Moore added.
With Congress adjourned for the 114th session, the bill would have to be reintroduced in the new congressional session that begins in January.
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