Three years after the Dodd-Frank Act failed to address the need for housing finance reform and end the record taxpayer-funded bailout of Fannie Mae and Freddie Mac, the Financial Services Committee this week approved legislation to end the bailout and create a sustainable housing finance system for America.
The bill, the Protecting American Taxpayers and Homeowners Act or PATH, ends the largest bailout in history ” nearly $200 billion taxpayer-funded bailout of Fannie Mae and Freddie Mac ” and phases out the troubled Government-Sponsored Enterprises within five years;
increases competition by ending the federal governments domination of the housing finance market that has left taxpayers liable for $5.1 trillion in mortgage guarantees; and
gives consumers more choices in determining which mortgage product best suits their needs.
The PATH Act creates a housing finance system thats designed for homeowners so every American who works hard and plays by the rules can have opportunities and choices to buy homes they can afford to keep. It creates a housing finance system thats designed for hardworking taxpayers so they never again have to bail out corrupt financial government enterprises like Fannie Mae and Freddie Mac, whose top executives engaged in accounting shenanigans to trigger huge bonuses for themselves, said Chairman Jeb Hensarling (R-TX). With the reforms in the PATH Act, Americans will finally have a housing finance system that is worthy of them.
The Financial Services Committee held 12 hearings since January and heard from more than 50 witnesses on the need to create a sustainable housing finance system for America and approved the PATH Act reforms after a 10-hour markup on Tuesday.
Some opponents of the bill claimed it would end the 30-year fixed rate mortgage, but phasing out Fannie Mae and Freddie Mac will not end the 30-year fixed rate mortgage since the government-sponsored enterprises are not lenders and such mortgages exist today without a government guarantee.
Some opponents of the PATH Act also claimed it would raise cause a rise in interest rates. But, in fact, relative to current law, the PATH Act will make homeownership more affordable.
Chief economist Mark Zandi of Moodys Analytics has testified that one single mortgage-related regulation of the Dodd-Frank Act could cause mortgage interest rates to increase 1-4%. Likewise, the American Securitization Forum stated that a Dodd-Frank regulation could double the interest rate and the National Association of Homebuilders has warned that proposed Dodd-Frank regulations could grind the housing finance system to a halt.
CoreLogic, a firm that analyzes markets, reports 52% of the Americans who bought homes in 2010 would not be able to finance a mortgage under requirements in the Dodd-Frank Act.
The non-partisan Congressional Research Service has also stated in a report that Dodd-Franks mortgage provisions are likely to reduce access to mortgage credit and increase barriers to homeownership for both creditworthy and disadvantaged borrowers.
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