“Yet another proposal for winding down Fannie Mae and Freddie Mac and overhauling the nation’s housing finance system will be put before Congress on Thursday, this one by Representative Maxine Waters of California, the ranking Democratic member of the Financial Services Committee.

“The major distinction of Ms. Waters’s proposal is that it would make the mortgage lending system more like a public utility, by creating a co-op of lenders that would be the sole issuer of mortgage-backed securities guaranteed by the government. Such a system would significantly differ from those proposed by the major bills in the Senate, which would allow banks and bond guarantors to participate independently in the market. Both Ms. Waters’s proposal and the Senate ones would establish a new federal regulator.

“The Waters bill would require private backers to take the first 5 percent loss before the government guarantee kicks in. By contrast, the latest Senate bill, by the Senate Banking Committee’s chairman, Tim Johnson, a Democrat from South Dakota, and Mike Crapo of Idaho, the committee’s ranking Republican, requires private capital to take the first 10 percent loss.

“Some economists say that during the housing crisis, Fannie and Freddie, which were formally taken over by the government in 2008 and now back the overwhelming majority of home mortgages, sustained approximately a 4 percent loss, but that number is in dispute. Setting the right levels of loss is a balancing act: The higher the loss requirement for the system’s private backers, the more expensive mortgages would be for home buyers, but the more vulnerable taxpayers would be in another crisis. Ms. Waters’s proposal would set the same guidelines for minimum down payments — 3.5 percent for a first-time buyer and 5 percent for everyone else — as the Johnson-Crapo bill, but would allow the regulator to lower those requirements at its discretion.”

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