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Chairman Hensarling Opening Statement at PATH Act Hearing

"The proposal we’ll discuss today will give Americans the better, fairer, and sustainable housing finance system they deserve."


Washington, Jul 18 -

Financial Services Committee Chairman Jeb Hensarling (R-TX) delivered the following opening statement at today's full committee hearing on the Protecting American Taxpayers and Homeowners Act: 

“Today, the Financial Services Committee meets in its 12th hearing over the last six months on the need to create a sustainable housing finance system. By the end of the hearing, our committee will have heard from more than 50 witnesses on this subject since January. 

“Americans clearly deserve a better housing system. One that protects homeowners and taxpayers, so that every American who works hard and plays by the rules can have opportunities and choices to buy homes they can actually afford to keep.

“One that protects hardworking taxpayers, so they never again have to bail out corrupt government sponsored enterprises like Fannie Mae and Freddie Mac, whose top managers engaged in extensive accounting fraud to trigger huge executive bonuses for themselves. 

“America needs a housing policy that is sustainable over time, not one that causes endless boom-bust cycles in real estate that harms our economy.

“Regrettably, such a common sense and responsible system is not in place America in today.

“Today, taxpayers have been forced to pay nearly $200 billion for the bailout of Fannie Mae and Freddie Mac. 

“Today, taxpayers remain on the hook for more than $5 trillion in mortgage guarantees, roughly one-third the size of our economy.

“Today, the federal government has a virtual monopoly on the housing finance system. That is unwise, unfair, and unsustainable.

“Today, Washington elites decide who can qualify for a mortgage. That puts homeownership out of reach for millions of credit-worthy American families. That is not fair.

“Americans truly deserve better.

“The proposal we’ll discuss today will give Americans the better, fairer, and sustainable housing finance system they deserve. It’s called the PATH Act because it Protects American Taxpayers and Homeowners. 

“The PATH Act ends the bailout of Fannie Mae and Freddie Mac by gradually winding them down over a five-year transition period. On their best day they delivered 7 to 25 basis points interest rate advantage to homebuyers, yet only delivered mediocre rates of homeownership -- contrasted with almost $200 billion of bailout; wrecked lives of those who lost their homes; artificially driving up cost of principal; and helping bring the economy to its knees. Fannie and Freddie did little to help the homebuyer but an awful lot to hurt the taxpayer and the economy.

"The PATH Act also protects taxpayers and homeowners by finally codifying what most everyone claims the FHA was designed to do; that is, an agency that was intended to help first-time homebuyers and those with low and moderate incomes. But instead, today they can insure millionaires’ mortgages for homes valued as high as $729,750. In many sections of my district, that’s a mansion. The mission creep has over-extended FHA. Today it is broke, unsustainable and projected to need its own taxpayer bailout, just like Fannie and Freddie. An unsustainable, bankrupt FHA will help no one. The PATH Act puts it on a sound footing.

"The PATH Act tears down barriers to private capital and frees homebuyers from a government-dominated system that puts, again, Washington elites in control of deciding who can and who cannot buy a home. Washington should not steer our citizens into mortgages that may not be right for them nor should Washington prevent them from taking out mortgages of their choosing. Reforms in the PATH Act increase competition, enhance transparency and give consumers more freedom to choose the mortgages that’s right for them as long as the terms are fully disclosed and understandable. Witnesses at our previous hearings have warned that regulations coming down the pike could increase mortgage interest rates 1 to 4 percentage points, lead to fewer home sales, and deter community banks from making mortgage loans. CoreLogic has warned that only half of today’s mortgages would comply with the bureaucratic Dodd-Frank rules that go into effect in just 177 days. Again, this is wrong and unfair.

"A significant number of members in this room have said they want to end Fannie and Freddie; they want a new system. But they want to do it up until it’s actually time to do it. And nearly five years after the bailout of Fannie and Freddie, I ask my friends on the other side of the aisle and in the Administration: If you don’t like our plan, where is your plan?

"Some say the plan will end the 30-year fixed mortgage. But it exists today without a government guarantee. Many of these same naysayers are the ones who said we had nothing to worry about with Fannie and Freddie -- “Let’s roll the dice” -- so thus their track record on predictions is not an enviable one.

"Some say this plan would end the federal guarantee for the housing finance system. Yet FHA, the Federal Home Loan Banks, the VA, and the rural housing programs are still there.

"Some say the PATH Act is ideological. But it seems to me that those who defend the status quo of a government-run monopoly complete with taxpayer bailouts, economic crises, and mediocre rates of homeownership are the ones that are being ideological.

"It’s past time to protect taxpayers and homeowners. It’s time to pass the PATH Act today.

"As I have stated publicly before, it is my intention to mark up the PATH Act before the House adjourns for the August district work period. 

"I look forward to this hearing."