Corker Calls Renewal of Federal Housing Loan Limits to Subsidize Expensive Mortgages “Unconscionable,” Will Oppose Spending Package

WASHINGTON, DC – November 17, 2011 – (RealEstateRama) — U.S. Senator Bob Corker, R-Tenn., a member of the Senate Banking Committee, today called an effort to renew excessive loan limits for mortgages backed by the Federal Housing Administration “unconscionable,” arguing the higher loan limits put taxpayers at risk when Congress should be restoring the private market for housing. A measure being added to an appropriations conference report would raise the FHA’s conforming loan limit to $729,750 after it had fallen to $625,500 in September.

“It is unconscionable that Congress would renew excessive loan limits for any of the government housing agencies when we should be weaning ourselves off of government dependence in the housing finance sector. And to tack it on to an appropriations conference report that spends too much and includes a continuing resolution necessary for keeping the federal government open further erodes the limited confidence the American people have in Congress. I won’t support it, and I call on my colleagues to oppose it as well,” Corker said. “Raising the loan limits at FHA only, an unprecedented move, will simply drive more business into Ginnie Mae securities and put the FHA at even greater risk of losses to taxpayers. If we cannot even take this simple step, we risk crowding out the private sector for years to come. That’s why I’ve introduced a bill to wind down Fannie Mae and Freddie Mac in a responsible way so that we can restore private funding in the mortgage market and put a stop to government dominance of housing.”

Last week, Senator Corker introduced the Residential Mortgage Market Privatization and Standardization Act to responsibly unwind government-sponsored enterprises Fannie Mae and Freddie Mac and end dependence on the government for housing finance.

The legislation contains the following elements:

Wind Down of Fannie Mae and Freddie Mac: Reduces each year the percentage of newly issued mortgage-backed securities’ (MBS) principal that is guaranteed by Fannie Mae and Freddie Mac. The percentage guaranteed must be reduced to zero within 10 years, at which point MBS will be wholly privatized.

Mortgage Market Transparency: Creates an industry-financed database that makes uniform performance and origination data on mortgages available to the public through the Federal Housing Finance Agency.

Creation of a new TBA Market: Initiates a process for creating deliverability rules and technology necessary for the “to-be-announced” (TBA) futures market with no government guarantee.

Monetization of Business Assets: Directs the sale of any technology, home price indices, and systems currently owned by the GSEs to private investors.

Uniform Underwriting Standards: Replaces the Qualified Residential Mortgage and risk retention with a 5 percent minimum down payment and full documentation requirement.

Residential Mortgage Market Uniformity: Creates a uniform pooling and servicing agreement (PSA) and a new electronic registration system (MERS 2) where all loans are transferred under one system regulated by the FHFA and instructs federal regulators to develop uniform practices and streamline mortgage regulations.

The bill text and a detailed section-by-section summary are attached below.