Mortgage finance experts took to their soapboxes in front of the Financial Services Committee Thursday to address key initiatives outlined in the recent Protecting American Taxpayers and Homebuyers (PATH) Act, which is designed with the goal to protect taxpayers and create housing stability.
The PATH Act is one of the most recent legislative efforts to reform the nation’s housing finance system and, more importantly, establish a path of bringing the private sector back into the mortgage finance system.
The proposed legislation received mixed reviews from mortgage experts, but all agreed that some type of reform needs to happen before Fannie Mae and Freddie Mac’s temporary conservatorship turns into a permanent fix.
Mark Zandi, chief economist of Moody’s Analytics, claimed the legislation contains a comprehensive, but ultimately unviable proposal to wind down the enterprises and privatize the mortgage market.
"If fully implemented, the PATH would lead to significantly higher mortgage rates, particularly in tough economic times, and would put 30-year fixed rate mortgage loans out of reach for most Americans," Zandi explained.
He added, "If the PATH becomes law, the FHA would account for no more than one-fifth of the mortgage market on average through the business cycle. The rest of the market would receive no government support."
On a similar note, David Stevens, president and CEO of theMortgage Bankers Association expressed his concerns about proposed changes in the PATH Act that would have negative consequences in four areas including, reducing theFederal Housing Administration’s guarantee, risk-sharing, indemnification and loan limits.
"MBA has serious concerns with the implications of such a significant policy change for the price availability of mortgage credit through the FHA program," Stevens warned.
He added, "Even if it were well constructed, such a change could significantly reduce the number of lenders willing to participate in FHA, given the increased risks to the lender."
However, there are some who strongly support the introduction of the PATH Act, specifically investors.
Tom Deutsch, executive director of the American Securitization Forum, firmly believes that many aspects of the PATH Act work toward the goal of introducing private-label residential mortgage-backed securities back into the market.
"ASF is strongly supportive in the near term of ratcheting down the federal government’s involvement in the U.S. housing finance system through gradual reductions in loan limits, appropriate increases in guarantee fees and the GSEs’ issuing material amounts of their securities that expose investors to credit risk of the underlying mortgages," Deutsch stated.
Similarly, some representatives argued that the PATH Act addresses concerns from the other side of the aisle, but the proposal is still not acceptable.
Rep. Scott Garrett, R-NJ, defended the proposal, claiming that the bill takes into consideration key issues that will ultimately benefit potential and current homeowners.
"The hemming and hawing and gnashing of teeth by friends across the aisle is a little surprising given the compromises included in the underlying legislation," he stated.
Overall, the panelists believe the PATH Act is a good starting point for the housing reform debate, but key changes will ultimately be necessary before the Act is delivered to the House for a vote.