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Housing Reform Plan Released

Posted on 2/26/2013

The Housing Commission of the Bipartisan Policy Center (BPC) yesterday released a plan to wind down Fannie Mae and Freddie Mac and significantly increase private lenders' participation in mortgage-market financing.

The report "proposes a new housing finance system that calls for a far greater role for the private sector, a continued but limited role for the federal government, the elimination of Fannie Mae and Freddie Mac, and reform of the Federal Housing Administration to improve efficiency and avoid crowd-out of private capital," the BPC said.

Under the commission's plan, banks and other private companies would take the lead in originating mortgages and in issuing mortgage-backed securities, while bearing the risks of default. In extreme cases in which private lenders are unable to absorb further losses, a "public guarantor" funded by premium payments would backstop financing for loans up to $275,000.

ABA President and CEO Frank Keating was a member of the Commission and gave the opening remarks at the briefing where the plan was unveiled.

"The report is a strong one, which I believe charts a course for a much-needed return of the private market to housing finance," Gov. Keating said. "It also states where government involvement is needed it is explicit, paid for, and limited… In the coming months, the Commission will continue its important work on housing policy by reaching out to policymakers and key stakeholders and holding forums across the country."

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