WASHINGTON – The White House welcomed bipartisan legislation to overhaul the nation’s mortgage financing system that cleared a crucial Senate hurdle on Thursday. The legislation would wind down the giant government-backed lenders Fannie Mae and Freddie Mac.
The Senate Banking Committee voted 13-9 to send the bill to the Senate floor. It still faces long odds to pass this year.
The bill would phase out Fannie and Freddie and reduce the government’s role in guaranteeing mortgage securities. The two firms had to be rescued by a $187 billion taxpayer bailout during the financial crisis. A House Republican bill would go further in privatizing the mortgage market.
“Today’s vote marks important progress toward completing one of the biggest remaining pieces of post-recession reform of the financial system,” White House press secretary Jay Carney said in a statement.
The legislation has been in the works for some time and is built on a proposal first advanced by Democratic Sen. Mark Warner of Virginia and Republican Sen. Bob Corker of Tennessee.
The bill would create a new Federal Mortgage Insurance Corp. that would provide backstop insurance, available only after a substantial amount of private capital is used up. Investors would pay insurance fees to the corporation while agreeing to put a substantial amount of their own capital at risk.
Some civil rights and consumer groups maintain that the government should play a larger role to ensure a steady amount of credit is available to potential homebuyers.