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senate Bill S. 1217

Housing Finance Reform: Goodbye to Fannie Mae and Freddie Mac, Hello to the Federal Mortgage Insurance Corporation

Argument in favor

Reduces the deficit by 5.7 billion over the next decade. Quasi-governmental entities like Fannie and Freddie are failures, and need to be retired. Would alleviate drag on lending and in turn spur the housing market.

Argument opposed

Encourages loans to non-creditworthy borrowers Drives up housing prices. Fails to adequately fund affordable housing in low-income neighborhoods. Replaces Fannie and Freddie with a new entity too similar to them.

bill Progress

  • Not enacted
    The President has not signed this bill
  • The house has not voted
  • The senate has not voted
      senate Committees
      Committee on Banking, Housing, and Urban Affairs
      Securities, Insurance, and Investment
    IntroducedJune 25th, 2013

What is Senate Bill S. 1217?

Housing reform legislation that would phase out Fannie Mae and Freddie Mac over the next five years while establishing a new entity, the Federal Mortgage Insurance Corporation (FMIC). Notably, the FMIC would become the new federal regulator of the mortgage industry, absorbing the current regulating agency, the Federal Housing Finance Agency. This new FMIC would explicitly guarantee 90% of losses on such securities; private institutions and lenders would cover the other, and initial, 10%. This risk-sharing would be waived in the instance of financial crisis, and could be employed up to three times over a three-year period.

Despite White House collaboration and its passage by the Senate Banking Committee, by a 13-9 vote, the bill faces a tough road to a full Senate vote and is opposed by the majority in the House of Representatives. 


If enacted, the bill would affect low-income housing, middle-class borrowing ability, and be a move toward privatizing the secondary housing market--the marker by which home mortgages are sold by banks to larger firms.

Cost of Senate Bill S. 1217

The CBO estimates that the changes in direct spending and revenues stemming from enactment of the bill would reduce deficits by $5.7 billion over the 2014-2023 period.

More Information


Senate Banking Committee Press Release 

You Tube: Senator Mike Crapo (R-ID) Discusses the Bill 

CBS: What Fannie and Freddie Are Doing Right Now

Of Note: 

According to Politico,


Fannie and Freddie do not originate mortgages but instead buy them from lenders and package them into securities to be sold to investors. They guarantee full payment on these bonds as part of a system that ensures money will be there for new loans.
The companies were taken over by the government in September 2008 and were handed $187.5 billion in taxpayer bailouts. They remain the dominant players in the housing market and have since returned to profitability, allowing them to send more funds back to the government than they received following the government takeover. Under the terms of the takeover, or conservatorship, they remain under government control despite the return of their bailout funds.


Housing Finance Reform and Taxpayer Protection Act of 2014

Official Title

A bill to provide secondary mortgage market reform, and for other purposes.