GSE Reform: The Options

Senate Banking Committee Chairman Tim Johnson (D-SD) and Ranking Member Mike Crapo (R-ID) released their highly anticipated housing finance reform draft. Built on the previous legislative framework introduced by Senators Bob Corker (R-TN) and Mark Warner(D-VA), their plan would wind down and eliminate the government-sponsored enterprises (GSEs), Fannie Mae and Freddie Mac, and establish the Federal Mortgage Insurance Corporation (FMIC) to provide an explicit government backstop for mortgage-backed securities (MBS) and regulate the new market. While Johnson-Crapo incorporates much of the framework laid down previously in Corker-Warner, their draft provides a greater level of detail and a few notable changes. This paper will highlight some of those changes and compare Johnson-Crapo with the leading housing finance legislation in the House, H.R. 2667 (the “PATH Act”).