Realtors and Builders Push for GSE Reform on 10th Anniversary of Conservatorship

by Patrick OToole

WASHINGTON – On September 6, 2008, as the financial crisis continued to disrupt markets across the globe, the Federal Housing Finance Agency moved to secure America’s housing industry, placing Fannie Mae and Freddie Mac into conservatorship. At the time, the FHFA took this action “to help restore confidence in Fannie Mae and Freddie Mac, enhance their capacity to fulfill their [housing] mission, and mitigate the systemic risk that has contributed directly to the instability in the current market.”

Today, a decade later, the American financial and mortgage lending systems look vastly different, in part due to lending and regulatory policy reforms supported and advanced by the National Association of Realtors, a NAR press release noted. Home prices are at or approaching record highs in many markets, while mortgage default and foreclosure rates sit near historic lows. In the meantime, the federal government’s conservatorship of Fannie Mae and Freddie Mac continues, with no long-term reform solutions on the horizon.

NAR President Elizabeth Mendenhall Comments

“Realtors support a methodical, measured approach to reform that will put Fannie Mae and Freddie Mac on the path to sustainability. First and foremost, we urge policymakers in Washington to prioritize GSE reforms that will protect taxpayers, provide liquidity to the broad national market, and promote stability in the housing market, particularly during times of economic distress.”

NAR believes that Fannie Mae and Freddie Mac should be replaced by a government authority(s) with private capital that is subject to tighter regulations and revenue generation, and is committed to fulfilling its mission as Congress intended. NAR also believes that the future housing finance system must ensure that there is mortgage capital available in all markets at all times, and under all economic conditions. Additionally, Realtors® believe it is critical to secure an explicit government guarantee in the secondary market, which should ensure the availability of long term, fixed-rate mortgage products (i.e. 30-yr fixed-rate mortgage).

NAR also continues to champion the importance of continued affordable mortgage capital availability for creditworthy Americans, particularly during economic downturns. This is a vital role that a fully private entity could not fill, and a reason why long-term GSE reform remains such a critical priority, even during times of U.S. economic expansion.

“Ultimately, without the government’s support of the GSEs and FHA-insured loans, private capital for mortgage lending would dry up during economic downturns, leaving home owners and home buyers with few – or no – options. This situation could be potentially devastating for the American economy, but fortunately it is avoidable. And it’s why NAR will continue to advocate for Congress and the administration to enact smart, comprehensive housing finance reforms that protect the nation’s housing market,” Mendenhall concluded.

On Wednesday, the National Association of Realtors, in conjunction with approximately 30 organizations that comprise the GSE Reform Coalition, sent a letter to the administration and Congressional leaders urging reforms to GSEs that will protect American taxpayers while protecting critical GSE functions. “Only through such efforts can we ensure an affordable, accessible housing finance system that works for American homeowners and renters alike,” the letter reads.

NAHB Chairman Randy Noel Comments

With Fannie Mae and Freddie Mac now marking their tenth year of conservatorship, the National Association of Home Builders (NAHB) today called on Congress to make it a priority to enact comprehensive reform to the nation’s housing finance system.

“To ensure a stable housing finance system that will support the future of homeownership and affordable multifamily housing in America, Congress must fix the structural flaws inherent in Fannie Mae’s and Freddie Mac’s government charters that contributed to the housing finance crisis,” said NAHB Chairman Randy Noel, a custom home builder from LaPlace, La.

Recently, House Financial Services Chairman Jeb Hensarling (R-Texas) and Rep. John Delaney (D-Md.) issued a draft of a housing finance reform bill that includes a federal government backstop to maintain stability in the market during times of economic turmoil.

NAHB believes a federal backstop is a critical element that must be incorporated into any overhaul of the housing finance system. NAHB is also urging Congress to enact further reforms that would:

  • Preserve the successful multifamily housing finance framework;
  • Continue the roles of the federal government housing agencies;
  • Provide an equal playing field for small lenders;
  • Restart a fully private mortgage-backed securities market; and
  • Enhance the activities of state and regional sources of housing funding.

“Comprehensive legislation that incorporates these elements will ensure that housing credit remains readily available and affordable in the future, provide the foundation for a stable housing finance system and protect taxpayers,” said Noel. “And as Congress deliberates, the administration needs to ensure that reforms put in place during conservatorship that have enabled Fannie Mae and Freddie Mac to better facilitate mortgage liquidity are not cast aside.” QR

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