The 113 th Congress has seen several developments in the effort to reform the housing finance system. In the House, the Protecting American Taxpayers and Homeowners Act of 2013 (PATH Act; H.R. 2767 ), which proposes to wind down the GSEs and would reform FHA, was ordered to be reported out of the House Financial Services Committee on July 24, 2013. In the Senate, the Housing Finance Reform and Taxpayer Protection Act ( S. 1217 ) was ordered to be reported with an amendment in the nature of a substitute by the Senate Committee on Banking, Housing, and Urban Affairs on May 15, 2014. This report briefly explains the different approaches to housing finance reform contained in these legislative proposals, focusing on efforts to replace Fannie Mae and Freddie Mac and to reform FHA. The report does not describe every provision of the proposals but discusses major concepts and themes. It would replace them with a National Mortgage Market Utility that would facilitate mortgage securitization but would not provide a government guarantee. The act would also eliminate or delay the implementation of certain existing regulations that some believe are inhibiting the recovery in the mortgage market. In addition, the PATH Act would reform FHA, making it an independent agency and taking steps intended to improve its finances, more narrowly target its market role, and increase the role of private capital. The Housing Finance Reform and Taxpayer Protection Act (S. 1217)

The Johnson-Crapo GSE bill ( S. 1217 , as ordered to be reported by the Senate Banking Committee) would wind down Fannie Mae and Freddie Mac and would replace FHFA with a new entity to be called the Federal Mortgage Insurance Corporation (FMIC). The FMIC would be an independent agency charged with supporting the mortgage market and providing reinsurance on eligible MBS. These MBS would have an explicit government guarantee, and the FMIC would regulate aspects of the mortgage market related to these MBS. The proposal would also establish a new multifamily housing finance system and method of funding affordable housing initiatives. Phase Out of Fannie Mae and Freddie Mac

Fannie Mae and Freddie Mac Wind Down . Similar to the single-family program, the FMIC guarantee would require private capital in a first-loss position. The FHA Solvency Act of 2013 (S. 1376)

While S. 1217 generally does not include any FHA provisions, a separate Senate bill proposes to make a number of changes to FHA aimed at strengthening its financial position. That bill, commonly referred to as the Johnson-Crapo FHA bill ( S. 1376 ), was reported out of the Senate Banking Committee on December 19, 2013.Most of the changes included in the bill are aimed at ensuring that FHA's programs are financially sound, but do not focus on limiting FHA's market role or shifting risk to the private sector to the degree that the PATH Act does. Table 2 compares the FHA reforms in the PATH Act and the Johnson-Crapo FHA bill.
The 113th Congress has seen several developments in the effort to reform the housing finance system. In the House, the Protecting American Taxpayers and Homeowners Act of 2013 (PATH Act; H.R. 2767) was ordered to be reported out of the House Financial Services Committee on July 24, 2013. The PATH Act proposes to wind down Fannie Mae and Freddie Mac (the government-sponsored enterprises, or GSEs) over several years. In this context, wind down refers to dissolving Fannie Mae and Freddie Mac by removing their charters and placing certain assets and liabilities into a receivership entity. It would replace them with a National Mortgage Market Utility that would facilitate private market mortgage securitization but would not provide a government guarantee. The PATH Act would retain in a modified form the existing government guarantee programs, such as the Federal Housing Administration (FHA). The act would also eliminate or delay the implementation of certain existing regulations that some believe are impeding recovery in the mortgage market. In addition, the PATH Act proposes to reform FHA by, among other things, making it an independent agency and taking steps intended to improve its finances, better target its role in the mortgage market, and increase the amount of private capital in the market.
In the Senate, the Housing Finance Reform and Taxpayer Protection Act (Johnson-Crapo GSE bill; S. 1217) was ordered to be reported with an amendment in the nature of a substitute by the Senate Committee on Banking, Housing, and Urban Affairs. The Johnson-Crapo GSE bill would wind down Fannie Mae and Freddie Mac and would replace the Federal Housing Finance Agency (FHFA) with a new Federal Mortgage Insurance Corporation (FMIC). The FMIC would be an independent agency charged with supporting the mortgage market and providing reinsurance on eligible mortgage-backed securities (MBS). These MBS would have an explicit government guarantee. The FMIC would only pay out on its guarantee after a significant amount of private capital absorbed the first losses. In addition, the FMIC would regulate aspects of the mortgage market related to its guaranteed MBS and would establish a new multifamily housing finance system.
The Johnson-Crapo GSE bill generally does not include FHA-related provisions. However, a stand-alone FHA reform bill has been introduced in the Senate. The FHA Solvency Act of 2013 (S. 1376; commonly referred to as the Johnson-Crapo FHA bill), which would reform FHA, was reported out of the Senate Committee on Banking, Housing, and Urban Affairs on July 31, 2013. The Johnson-Crapo FHA bill proposes a number of changes to FHA aimed at ensuring that FHA's single-family programs are financially sound, including a number of provisions that have been sought by FHA.
This report will briefly explain the different approaches to housing finance reform offered by these legislative proposals, focusing on efforts to replace Fannie Mae and Freddie Mac and reform FHA. The report does not describe every provision of the proposals but discusses major concepts and themes.