Delaney: Five Years After Dodd-Frank, More Work Left to Be Done

WASHINGTON – Five years ago this month an important step towards consumer and investor protection was taken as the Dodd-Frank Wall Street Reform Act was signed into law. Passed after the greatest financial crisis since the Great Depression, the law increased consumer and investor protections, created the Consumer Financial Protection Bureau and gave the Securities and Exchange Committee new enforcement authority.

However, Congress has not passed housing finance reform.  During the financial crisis over 11 million Americans were displaced by foreclosures. In September of 2008 Fannie Mae and Freddie Mac were placed into conservatorship. Seven years later, their legal status has not changed. 

This year, Congressman John K. Delaney (MD-6), with his colleagues Rep. Jim Himes (CT-4) and Rep. John Carney (DE- At large) introduced the Partnership to Strengthen Homeownership, legislation to protect the fixed-rate 30-year mortgage and shield American taxpayers from future bailouts by reforming the housing finance system.

“As we reflect on the anniversary of Dodd-Frank, it is important to remember why these financial reforms were necessary. Dodd-Frank was born during a time of severe crisis and a time of severe hardship for millions of Americans,” said Congressman Delaney. “The financial crisis and the Great Recession that followed led to millions of Americans losing their home, their job, or both. Five years later our markets are stronger, investments are more secure and the economy is growing. However, housing policy was a contributing factor to the financial crisis and we still need comprehensive housing finance reform. The Delaney-Carney-Himes housing bill protects the thirty-year mortgage, reduces the risk of another taxpayer bailout and strengthens affordable housing programs. By using risk-sharing to combine the private sector’s ability to price risk with a government guarantee, our legislation provides an innovative framework that should appeal to members on both sides of the aisle. Five years after the passage of Dodd-Frank and seven years after the financial crisis, we still have work to do to protect homeowners and investors.”

The Delaney-Carney-Himes legislation, first introduced last Congress, establishes an insurance program through Ginnie Mae which maintains the full faith and credit of the federal government, but protects taxpayer investment by requiring adequate private sector capital and accurate pricing of government reinsurance. All government guaranteed single-family and multi-family mortgage-backed securities will be supported by a minimum of 5% private sector capital, which will stand in a first loss position. The remaining 95% of the risk will be shared between Ginnie Mae and a private reinsurer on a pari passu basis. Fees paid to Ginnie Mae for providing these securities will be allocated to affordable housing programs. The bill winds down Fannie Mae and Freddie Mac and allows them to be sold and recapitalized. 

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