WASHINGTON (AP) - A bipartisan group of senators has proposed an overhaul to the housing finance system that shifts more mortgage and credit risk to the private sector and gradually dissolves Fannie Mae and Freddie Mac, the two government-sponsored mortgage guarantee giants.
The lawmakers from the Senate Banking Committee say their legislation would protect taxpayers from bearing the costs of housing market downturns as occurred in the 2008 financial crisis when Fannie and Freddie were nationalized and bailed out with $187 billion in taxpayer-funded loans.
The legislation would create a new Federal Mortgage Insurance Corporation that would provide backstop insurance available only after a substantial amount of private capital is used up.
Fannie and Freddie currently own or guarantee half of all U.S. mortgages and back nearly 90 percent of new ones.
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