Peters: End Bailouts & Preserve 30 Year Fixed Mortgage
WASHINGTON, D.C. – July 11, 2013 – (RealEstateRama) — U.S. Representative Gary Peters today raised concerns over the Chairman of the U.S. House Financial Services Committee’s GSE reform proposal that would eliminate the 30-year fixed rate mortgage. Peters believes the plan, unveiled today, would make homeownership too expensive for many middle class families, potentially undermining our economic recovery.
“For middle class families and those working hard to get there, affordable homeownership is the cornerstone of the American Dream and the 30-year fixed mortgage has made that possible,” Peters said. “Our economy is growing too slowly and the housing market is still recovering. I have serious concerns with any proposal that makes it harder for people to provide for their family and afford a home because it would mean jeopardizing our middle class.”
Peters has worked with Republican Congressman John Campbell on a bipartisan plan to overhaul the federal mortgage system to prevent taxpayer funded bailouts and ensure access to affordable homeownership. In 2011, they introduced a plan to replace our current system, which allows GSEs to rack up massive profits while leaving taxpayers with all the risk, with privately capitalized entities authorized to purchase an explicit and limited guarantee covering the securities they issue. They proposed a new system that would be built on the concept of the Federal Deposit Insurance Corporation (FDIC) and would ensure that bedrock housing financial products like the 30-year fixed-rate mortgage remain accessible for qualifying households. In the 2011 proposal, securities issuers would be required to keep healthy capital reserves, which would stand in between taxpayers and potential losses, and would also pay into a privately-capitalized catastrophic reinsurance fund. The fund could only be tapped in after the issuer’s assets had been exhausted and would cover payment of principal and interest on mortgage-backed securities to investors only.
Peters continued, “I believe we can find a reasonable, bipartisan approach to housing reform that ends taxpayer-funded bailouts, but still ensures middle class families can buy a home and build equity without losing their shirt. It is unacceptable to eliminate the 30-year fixed rate mortgage and risk undercutting any progress we’ve made at economic recovery.”
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