A group of US senators are drafting a bill that would liquidate the government owned Fannie Mae and Freddie Mac and replace them with a government re-insurer of mortgage securities that would fall behind private capital investors.
The bill hopes to limit the governments role in mortgage finance by taking on the risk only in catastrophic circumstances.
The first draft would require private financiers to take a first loss position with the ability to cover price falls comparable with those seen during recessions over the last 100 years.
Housing industry participants have criticised amount of risk that private capital would assume.
The bill is likely to be ping ponged back and forth while it takes shape and is not likely to come in until 2017.
