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the latest SECONDARY MARKET A competitive while mitigating the risk of loss to taxpayers. Another proposed transitional step is to eliminate the enterprises' affordable housing goals, replacing them with "more transparent and accountable" counseling and rental assistance programs. "Our new access fund—paid for not by taxpayers but through se c on da r y m a r k e t "As memory of the crisis fades, the GSEs will again entrench themselves deeper and deeper into our system of housing finance. Soon, the path of least resistance will be to simply reconstitute Fannie and Freddie as they were. That would be totally irresponsible." — Debra Stilla, Mortgage Bankers Association a small assessment on only those loans that go through the government platform—is dedicated to the sustainability of homeownership and to providing decent rental opportunities, while making it very clear where the money goes and putting in place strict criminal penalties against misuse," the senators explained in an op-ed published on Politico. Finally, the bill would establish a new corporation—mutually owned by small banks and credit unions—created to protect local banks and credit unions from cannot think the current system works," the opinion piece reads. "As memory of the crisis fades, the GSEs will again entrench themselves deeper and deeper into our system of housing finance. Soon, the path of least resistance will be to simply reconstitute Fannie and Freddie as they were. That would be totally irresponsible." In addition, the bill would replace the Federal Housing Finance Agency—the GSEs' conservator since 2008— with a new federal agency called the Federal Mortgage Insurance said. "Lastly, internal conflicts may shift the administration's focus away from housing reform. These factors could delay the bill from being considered." "In any event, given that many important details need to be fleshed out in terms of prospective mortgage market functioning, the likelihood of passage in current form remains very low; the bill is simply a work-in-progress and represents a bipartisan starting point for the discussion of broader housing finance reform," they conclude. The M Report A na ly t ic s bipartisan group of senators introduced legislation to replace Fannie Mae and Freddie Mac with a newly created agency. Citing the overwhelming presence of the GSEs in today's mortgage marketplace, Sens. Bob Corker (R-Tennessee) and Mark Warner (D-Virginia) unveiled a new piece of legislation designed to wind down the enterprises and rebuild the private mortgage sector. Also involved in the unveiling were Sens. Mike Johanns (R-Nebraska), Jon Tester (D-Montana), Dean Heller (R-Nevada), Heidi Heitkamp (D-North Dakota), Jerry Morgan (R-Kansas), and Kay Hagan (D-North Carolina), all members of the Senate Banking Committee. The legislation would dissolve Fannie and Freddie within five years of passage and transfer appropriate utility duties and functions to a "different, modernized, and streamlined agency." The transfer would be done with a fiduciary duty to maximize returns to the taxpayer as the GSEs' assets are sold off. In addition, the new bill requires private market participants to hold 10 percent of the first loss of any mortgage-backed security (MBS) that purchases a government reinsurance wrap. It also sets up an infrastructure for splitting up credit investors— who are willing to take on the risk of loss—from rate investors, thus keeping mortgage rates being "gobbled up by the mega banks as soon as Fannie and Freddie are dissolved," thus ensuring direct access to the secondary market for institutions of all sizes. Initial reactions to the proposed legislation have been positive so far, with Mortgage Bankers Association chairman Debra Still calling it a "significant milestone" in the development of a long-term plan for the role of government in the mortgage market. "Some might say this goes too far, others not far enough. But regardless of where your political sensibilities are, you s e r v ic i ng A senate group introduces a bill to break up the now profitable GSEs, but some analysts doubt that a bill to dissolve the GSEs will pass unscathed. Or ig i nat ion Talk of Dissolving GSEs Ramps Up Corporation (FMIC). The agency would provide explicit government reinsurance of conforming loans by charging a guarantee fee (g-fee) and placing the proceeds in a mortgage insurance fund (MIF). In addition, FMIC would have the responsibilities of setting standards for eligible loans, creating a standard securitization platform, and approving private mortgage insurance providers, among others. While analysts say the bill marks an important starting point for secondary market reform, Barclays researchers say it may not go anywhere in its current form. "The bill may have a difficult road to passage: Democrats in particular could have concerns with the bill's affordable housing provisions. With housing stabilizing and the GSEs profitable, Congress could also choose to focus on fiscal policy or other topics near term," they | 79