Written By: Joel Palmer, Op-Ed Writer
Reform of the government-sponsored entities (GSEs) has been a hot topic since the new year began.
Activity reached a peak earlier this month when it was reported that the acting director of the Federal Housing Finance Agency (FHFA), Joseph Otting, indicated that a plan to take the GSEs out of conservatorship was on the horizon.
Otting is leading FHFA as Mark Calabria awaits Senate confirmation.
A recording obtained from a meeting Otting had with staffers quoted the acting director as saying:
“The Treasury and the White House viewpoint is that the [FHFA] director and the secretary of the Treasury have tremendous authority and that they would act, I think, independent of legislation if they thought it was the right thing to do.”
But more than a week later, the White House issued a statement that seemed to contradict the acting director’s assertion.
Said White House spokeswoman Lindsay Walters in a statement: “Housing finance reform is a priority for the Administration. The White House expects to announce a framework for the development of a policy for comprehensive housing finance reform shortly. At this time, no decisions have been made on any reform plan. As part of the process, however, the Administration will work with Congress to formulate a plan that fully addresses the risks to taxpayers presented by the current housing finance system and that improves the ability of creditworthy Americans to buy a home.”
Another organization opposed to GSE reform without legislation is the Milken Institute, which released a report on housing reform earlier this month.
In a summary of the paper, the institute said “we do not see a viable path by which administrative measures can fix critical flaws in the GSE charters—and fixing these flaws should be viewed as a necessity. Releasing the GSEs from conservatorship without a plan in place to resolve the charter flaws—most notably, the privatizing of profits and socializing of losses—would be to disregard the lessons of the firms’ failures during the financial crisis.”
Last last week, Idaho Senator Mike Crapo, Chairman of the Senate Banking Committee, released an outline for housing finance reform legislation.
“We must expeditiously fix our flawed housing finance system,” said Crapo in a press release. “My priorities are to establish stronger levels of taxpayer protection, preserve the 30-year fixed rate mortgage, increase competition among mortgage guarantors, and promote access to affordable housing.”
Crapo proposes to turn Fannie Mae and Freddie Mac into private guarantors and allow for other private guarantors to compete.
It also calls for converting FHFA’s leadership structure from a single director to a bipartisan board of directors.
Crapo also calls for replacing affordable housing goals and duty-to-serve requirements with a Market Access fund. This fund would provide grants, loans and credit enhancement.
This week, the National Association of Realtors will host a policy forum, during which it will unveil a “new comprehensive vision for GSE reform.”
NAR’s statement of the forum said this new vision will be discussed during the final session. The research shared will “provide a pragmatic, bipartisan solution that prioritizes and protects a liquid mortgage market for Middle America and underserved borrowers alike.”
"More than a decade has passed since the federal government assumed control of Fannie Mae and Freddie Mac,” said NAR Senior Vice President of Government Affairs Shannon McGahn. “While the housing market today is in a significantly better state than it was before the financial crisis, NAR continues to urge policymakers to address challenges that could arise in future economic downturns."
About the Author
As an NAMU® Opinion Editorial Contributor, Joel Palmer is a freelance writer who spent 10 years as a business and financial reporter and another 10 years in marketing for the insurance and financial services industries. He regularly writes about the mortgage industry, as well as residential and commercial real estate, investments, and retirement income planning. He has also ghostwritten books on starting a business, marketing, and retirement income planning.