This is the fourth article in a series of articles titled “To Strengthen America” with the purpose of presenting information to the public of bills currently being considered by congress. Ten bills are discussed in this series “To Strengthen America” all of which were addressed at the 2014 Conservative Policy Summit, http://heritageaction.com/policysummit/#.Uyy762dOXmJ

 

HR 2767    

 

The Protecting American Taxpayers and Homeowners Act also known as the “PATH Act was introduced by Scott Garrett of New Jersey on July 22, 2013 and has 51 cosponsors. http://beta.congress.gov/bill/113th-congress/house-bill/2767/cosponsors?q=%7B%22search%22%3A%5B%22hr2767%22%5D%7D

 

House Committee on Financial Services reports that under H.R. 2767 the charters of Fannie Mae and Freddie Mac would be repealed causing their operation to end five years afterwards.  With this bill, come 2018, new mortgages will no longer be guaranteed by Fannie and Freddie, the current government-sponsored enterprises (GSEs). At first this would increase direct spending by $229 million from 2014 to 2018 and reduce revenues by $853 million from 2014 to 2023. However implementing this legislation will decrease the discretionary spending by $41.2 billion during the same time period.

http://www.cbo.gov/publication/44672

 

The main points of this bill are:

  • Dissolves Fannie Mae and Freddie Mac, ending the dominance of the federal government on the housing finance system.
  • Phases out the failed taxpayer-backed business model of Fannie and Freddie by ending the taxpayer subsidies over a five year period.
  • Restores the traditional mission of the Federal Housing Administration of serving first-time homebuyers and those with low and moderate incomes by insuring loans to qualified borrowers during economic crisis.
  • Attracts investment and encourages innovation by removing the regulatory barriers to private capital.

 

With the implementation of HR 2762 PATH Act the current government-sponsored enterprises, GSE’s charters, would be affected by the placing of many of their assets into receivership, and their role in the mortgage market would be replaced by a National Mortgage Market Utility which would facilitate the secondary mortgage market without a federal guarantee.

 

Read the full bill:

https://www.govtrack.us/congress/bills/113/hr2767/text

 

There are several similar bills right now in congress that can make it confusing. One of the bills that the 2767 PATH bill should not be confused with is the Senate bill 1217 Housing Finance Reform and Taxpayer Protection Act introduced by Senators Bob Corker and Mark Warner. http://www.realclearmarkets.com/articles/2013/07/31/housing_finance_reform_fool_me_once_shame_on_you_fool_me_twice_shame_on_me_100511.html

Also similar is the Johnson-Crapo Housing Finance/GSE Reform Bill which was released on March 16, 2014 and is a reformation of Senate bill 1217.  http://novogradac.wordpress.com/2014/03/18/key-aspects-of-the-johnson-crapo-housing-financegse-reform-bill/

 

The American Banker speaks of several of these bills. This is found on their website: “The GOP plan, which is co-sponsored by Rep. Scott Garrett, R-N.J., and others, would effectively take the government out of the housing market. It would unwind Fannie and Freddie in five years, while simultaneously reducing the role of the FHA in the mortgage market. Before Fannie and Freddie would be dismantled, the bill would require the portfolios of the two government-sponsored enterprises to fall by 15% per year until they hit a floor of $250 billion. Fannie and Freddie would also have to share 10% of the credit risk from new business every year with the private market.”  http://www.americanbanker.com/issues/178_154/cheat-sheet-the-future-of-housing-finance-reform-1061223-1.html?zkPrintable=true

 

Basically as far as I can tell, the PATH act winds down Fannie Mae and Freddie Mac replacing them with a National Mortgage Market Utility, so before where the government was choosing who would survive and who wouldn’t, with PATH there will be less government control. The question to ask is; should the federal government be in the business of providing home loans to anyone, whether they are rich or poor?  For after all, the Fannie Mae and Freddie Mac mess has proven that the Federal Government should not be running or monitoring mortgage lending.

 

On bipartisanpolicy.org is found this statement: “The PATH act and the Fairholme plan would raise modest amounts of revenue for the government while ostensibly limiting its exposure in the event of another market downturn.  The Bipartisan senate bills—Corker-Warner and Johnson-Crapo—that have garnered support from the White House would also generate revenue from CBO/OMB perspective, but leave the government vulnerable to trillions of dollars of costs in the event of another market collapse by explicitly assuming the liabilities for all existing mortgage-backed securities issued by the GSEs.” http://bipartisanpolicy.org/sites/default/files/files/CATO_3-18_workingpaper.pdf

 

Other views on the “PATH ACT”

https://www.economy.com/mark-zandi/documents/2013-07-17-Evaluating-PATH.pdf

http://www.heritage.org/research/reports/2013/07/%20hensarling-housing-finance-plan-welcome-step-to-solve-the-fannie-and-freddie-mess

 

So after you study out this issue as I have done, contact your congressmen and let them know what you think. You can contact them at http://whoismyrepresentative.com/

 

Read the whole “To Strengthen America” series:

http://patriotupdate.com/articles/strengthen-america-part-hr-1847/  http://patriotupdate.com/articles/strengthen-america-part-ii-hr-2300/

http://patriotupdate.com/articles/strengthen-america-part-iii-s-2015/

Watch for the next six articles on PatriotUpdate.com