Is there a way for policymakers to forge ahead with a housing plan that will create robust lending options, home affordability and a free-market system where the private sector takes on most of the risk? And when the housing economy needs answers, it's time for a thinktank.
Members of the Bipartisan Policy Center hosted a forum in Dallas to answer those questions Tuesday morning. More specifically, the plan is the brainchild of the BPC Housing Commission, which is hosting forums across the country this summer, to discuss housing finance reform.
While policymakers and industry leaders on the commission remain confident a bipartisan housing plan can be constructed, some areas of concern linger.
For Frank Keating, president and CEO of the American Bankers Association and Oklahoma’s former governor, the ability-to-repay rule left the market with some unanswered questions — namely how to get more people into mortgages with tighter underwriting standards hitting lenders as part of Dodd-Frank’s ability-to-repay rule.
Keating is particularly concerned with the 43% debt-to-income ratio – a formula that could discriminate against borrowers such as the elderly in areas like Florida, where they remain asset wealthy without sufficient income to meet the 43 DTI ratio, the former governor pointed out.
Keating sees a healthy lending market as one that provides an assortment of products with clearer instructions on how the loans should work. This equates to a belief in more private capital.
“There are many different ways to own a home,” Keating said. “What concerns me is the box we are creating, but I don’t think we want to say the Canadian model should never exist in America at any time or any place. You encourage different loans and different loan terms.”
He added, “Even balloons (can work) as long as there is a clear understanding of the terms.”
As far as what the BPC Housing Commission is advocating, they set up a series of clear goals, Keating said during the first panel discussion held in Dallas.
The first goal is a greater role for the private sector, forcing that side of the market to foot most of the risk. The idea is to lessen the government's footprint, creating a “greater diversity of funding resources,” Keating noted.
Furthermore, the commission wants a continued, but limited government backstop that will replace Fannie Mae and Freddie Mac over the course of the transition with a public guarantor.
Across the board, morning panelists – which included former Sen. Mel Martinez (now with JPMorgan Chase); former HUD Secretary Henry Cisneros; Renee Glover, president and CEO of the Atlanta Housing Authority; and Nan Roman, president of the National Alliance to End Homelessness – cited housing affordability as a key concern.
Furthermore, the commission wants to ensure home loan access is considered when lawmakers draft a final plan. Their ideal plan proposes a marked shift at the FHA, “which must return to its traditional role of primarily serving first-time homebuyers and borrowers with limited downpayments,” Keating said.
As for how many Americans should be homeowners, Martinez says the numbers will inevitably vary, depending on the economy and individual life circumstances.
“It would be a mistake for the government to artificially set a goal on how many should be homeowners and how many should rent,” he said. A report also out earlier, highlights the divergence in rental market investments, as supplemental information to the challenges at today's housing forum.
Nan Roman, president of the National Alliance to End Homelessness, said her chief concern is the country remains seven million properties short when it comes to providing housing for low-income families. She credited the commission for taking up the housing access issue.
Renee Glover, president and CEO of the Atlanta Housing Authority, shares similar concerns.
"The economy is still sorting itself out in terms of employment opportunities. We are living in a new normal. Having said that I do think that the aspiration for owning a home will always be a strong cornerstone of the American way of life."