Tester, Johanns Build Momentum for Housing Finance Reform
Senators hold hearing to highlight new legislation to protect taxpayers and 30-year mortgage, ensure access for community-based institutions
(U.S. SENATE) – Senators Jon Tester (D-Mont.) and Mike Johanns (R-Neb.) continue to build momentum behind their bipartisan efforts to protect taxpayers by reforming America’s housing finance market.
Tester and Johanns discussed bipartisan legislation they are cosponsoring, The Housing Finance Reform and Taxpayer Protection Act, at a hearing today in their Banking Subcommittee. The hearing examined how their legislation would rebuild the housing finance system to protect taxpayers and ensure that smaller mortgage originators, such as the community banks and credit unions, continue to play an important role in the lending process.
“Community-based institutions play a critical role in our housing market by providing a lifeline for many American homeowners, particularly those in rural America,” Tester said. “These institutions know and serve their customers with their unique brand of relationship-based lending, and we must make sure they continue to have equal access to our housing market.”
“Since taxpayers were forced to bail out lending giants Fannie Mae and Freddie Mac in 2008, families across the country are increasingly turning to banks and credit unions in their communities for affordable, accessible, responsible financing options,” Johanns said. “It’s important that we reform our housing finance market to protect taxpayers, but also ensure that families are left with the option of receiving their mortgages from lenders on Main Street that they know and trust. Our bipartisan legislation does just that.”
Community financial institutions are now providing one-third more mortgages to homeowners – especially in rural markets – than before the financial crisis. The senators’ hearing focused on the importance of preserving the role of small financial institutions in the housing finance market.
Tester and Johanns’ Banking panel, the Subcommittee on Securities, Insurance, and Investment, heard testimony from witnesses representing community banks, credit unions and the Federal Home Loan Banks, as well Sandra Thompson, a deputy director with the Federal Housing Finance Agency.
The Senators’ bill is supported by a wide range of Montana banks and credit unions.
“Montana bankers applaud Senator Tester for his leadership with the introduction of the bi-partisan Housing Finance Reform and Taxpayer Protection Act,” said Steve Turkiewicz, President and CEO of the Montana Bankers Association. “As the title indicates this bill addresses the important need to reform the government’s role in the mortgage market, fostering a well-functioning private mortgage market that is accessible by Montana borrowers and lenders and reducing the risk to taxpayers.”
“Senator Tester understands that a financially sound secondary mortgage market is critical to ensuring consumer access to mortgages in all areas of the country, including rural Montana,” said Montana Independent Bankers President Kenny Martin of Frist Bank in Lincoln. “Since his arrival in the Senate in 2007, Senator Tester has been a strong champion of independent banking in Montana and across the Country and today’s hearing demonstrates that continued support.”
“The Montana Credit Union Network applauds Senator Tester’s efforts to strengthen America’s housing finance system while ensuring that credit unions can continue to provide mortgages to Montana families,” said Tracie Kenyon, President and CEO of the Montana Credit Union Network. “We are so thankful to have such a strong leader like Senator Tester looking out for Montana’s businesses and locally-owned credit unions.”
In 2008, the government put government-sponsored housing organizations Fannie Mae and Freddie Mac in conservatorship, providing a taxpayer-funded backstop to ensure the accessibility and affordability of 30-year fixed-rate mortgages for American families.
As a result, the private mortgage market is struggling and today nearly every loan made in America comes with a government guarantee, leaving taxpayers potentially liable for losses. Despite this unsustainable situation, there has still been no real reform to the housing finance system since the financial crisis.
The bipartisan reform legislation Tester and Johanns are cosponsoring, which was recently introduced with Senators Mark Warner (D-Va.) and Bob Corker (R-Tenn.), would wind-down Fannie Mae and Freddie Mac, which are tasked with guaranteeing and purchasing home loans. Replacing Fannie and Freddie would be a new system that strengthens the nation’s housing market by protecting taxpayers, preserving the 30-year fixed rate mortgage, and ensuring that small financial institutions can continue to serve rural communities.
The bill is also co-sponsored by Dean Heller (R-Nev.), Heidi Heitkamp (D-N.D.), Jerry Moran (R-Kan.), Kay Hagan (D-N.C.), Mark Kirk (R-Ill.), and Joe Manchin (D-W.V.).