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NTU Supports Bill to Reduce Taxpayer Exposure from the GSEs

by Thomas Aiello / /

The Honorable Ed Royce

United States House of Representatives

2310 Rayburn House Office Building

Washington, DC 20515

 

The Honorable Gwen Moore

United States House of Representatives

2252 Rayburn House Office Building

Washington, DC 20515

 

Dear Congressman Royce and Congresswoman Moore,

On behalf of National Taxpayers Union (NTU), I write to endorse H.R. 3556, the “Taxpayer Protections and Market Access for Mortgage Finance Act of 2017.” This legislation provides new safeguards for taxpayers by requiring the two home finance Government Sponsored Enterprises (GSEs) to increase credit risk transfers with the private sector. NTU is confident that H.R. 3556 will help to stabilize the housing market, reduce taxpayer exposure, and establish a framework for an overhaul of the GSE system.

The collapse of the housing finance system played a pivotal role in the 2008 financial crisis. Nearly nine years later, Fannie and Freddie remain under government conservatorship and their guarantees exceed the level from when the conservatorship began. NTU has long expressed concern about the potential risks to taxpayers posed by GSEs. Recent estimates indicate that GSEs have $4.5 trillion in mortgages, which carry about $200 billion of real risk outlays at any given time.

Specifically, this legislation will transfer credit risk to a broad array of investors in the private sector. This will build liquidity in the market and reduce systemic risk, helping to ensure that taxpayers are not left with the bill for another bailout of the housing market. Importantly, this mechanism allows capital to flow uninterrupted into the U.S. mortgage market, providing more affordable mortgages for borrowers at less peril to taxpayers.

NTU's concerns over taxpayer exposure from Fannie and Freddie cannot be overstressed: years of government intervention have only impeded the development of innovative housing finance policy that relies on private capital. Accordingly, NTU looks forward to assisting you and your colleagues in securing passage of H.R. 3556.

Sincerely,

Thomas Aiello

Policy and Government Affairs Associate