A group of congressmen will soon introduce legislation to wind down Fannie Mae and Freddie Mac and replace them with a risk-sharing housing finance system.

John K. Delaney (D-Md.), John Carney (D-Del.) and Jim Himes (D-Conn.)—part of a group of moderate representatives known as the New Democrat Coalition—announced the proposal Jan. 16.

The proposal suggests putting the risk on private capital participants for at least the first 5 percent of a mortgage securitization with a government guarantee, through Ginne Mae. Any loss on the remaining share of the risk would be equally split between Ginnie Mae and a private reinsurance company.

“To ensure a stable housing finance system, we must move past the current state to a new system that engages more private sector capital and private sector pricing of risk in partnership with an explicit government role in the provision of stabilizing liquidity to the market–this bill does that,” Delaney says in a news release.

The proposal also suggests scaling back Fannie Mae and Freddie Mac and replacing them with the Ginnie Mae securitization, leaving the Federal Housing Finance Agency to oversee the reduction of the two government-sponsored enterprises, or GSEs. The proposal was announced weeks after former U.S. Rep. Mel Watt was sworn in as the director of FHFA.

The congressmen intend to target the multifamily sector by creating a structure for financing that follows the public-private model and provides government guarantees as needed, according to the release.

Affordable housing will also be supported in the proposal through insurance fees charged by Ginnie Mae. The fees charged—ranging between 5 and 10 basis points of the total balance of the mortgages—will be used to strengthen the nation’s affordable housing by allocating money to the Department of Housing and Urban Development and Department of Treasury, the release states.

“I’m excited to join this effort to merge the efficiency of markets with the scale of government to create a safer, more liquid housing market that will help make housing more affordable while reining in the risk to our economy,” Himes says in the release. “I look forward to gathering input from housing experts across the spectrum and am particularly interested in working to improve the availability of multifamily housing.”

For more information on the proposal click here.

Lindsay Machak is an Associate Editor for Multifamily Executive. Connect with her on Twitter @LMachak.