Garrett Announces Housing Finance Reform Proposal

On October 27, Scott Garrett (R-NJ), chairman of the House Financial Services Subcommittee on Capital Markets and Government-Sponsored Enterprises, published a press release announcing his proposal “to reform the secondary mortgage market to ensure robust private investment in the U.S. mortgage market without a government guarantee.”

Garrett’s release states, “[M]y proposal to reform the secondary mortgage market will facilitate continued standardization and uniformity, ensure rule of law and legal certainty, and provide investors with the standardization and transparency necessary to ensure that a deep and liquid market develops in the absence of Fannie and Freddie.”

Garrett’s proposal will:

• Direct the Federal Housing Finance Agency (FHFA) to develop uniform standards for a variety of mortgage categories;
• Abolish the Dodd-Frank risk-retention requirements for mortgage-backed securities;
• Remove conflicts of interest between servicers and investors;
• Prevent regulators from unilaterally forcing investors to reduce the principal of loans they have invested in; and
• Increase the quality of loan level information and disclosures that investors can use to evaluate the value of the mortgages.

Garrett said he expects to introduce his bill on October 31.