Once again, our people in Washington D.C. are taking steps to “fix” the mortgage industry.
On June 25, 2013 the Corker-Warner Housing Finance Reform and Taxpayer Protection was introduced with the stated intention of “strengthening America’s housing finance system by replacing government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac with a privately capitalized system that preserves market liquidity and protects taxpayers from future economic downturns.”
According to the Bob Corker Website (http://www.corker.senate.gov), the private mortgage market has all but disappeared as a result of the 2008 Fannie Mae / Freddie Mac bailout (via a $188 bill capital injection from taxpayers). Today, nearly every loan made in America comes with a full government guarantee.
This is a complex piece of legislation, encompassing 154 pages. (You read the summary plus the entire text at the Corker website above.)
Along with other things, it would create a new Federal Mortgage Insurance Corporation (FMIC) while phasing out Freddie, Fannie, and the current Federal Housing Finance Agency.
It will eliminate the “Affordable Housing Goals” that forced Fannie and Freddie into making loans that people couldn’t possibly repay. At the same time it will establish a Market Access Fund focused on making grants to state housing agencies, promoting affordable rental housing, and providing borrower counseling programs. They still want everyone to have housing – but have abandoned the idea that everyone must own a home.
On the scary side, the new FMIC will have the authority to issue regulations.
Another highlight of the Corker-Warner legislation deals specifically with second Trust Deeds – commonly known as home equity loans.
Under the terms of this bill, a first lien holder on a single family home mortgage would be allowed to block the homeowners from taking out a home equity loan. Any time the combined loan to value ratio reaches 80% or more, the homeowner will be required to obtain approval (permission, which may or may not be granted) from the first lien holder. That first lien holder will be allowed to decide the home’s market value through their own in-house appraisal department.
The bill also calls for the creation of a database that will track second liens and notify first lien holders of their existence – and of the homeowner’s payment history on those junior liens.
Going back to the actions that caused the mortgage melt-down in the first place, we see that the unintended consequences of Congressional interference in the housing industry have been dire. Let’s hope this latest “fix” is not more of the same.