After several critical years in the wake of the housing meltdown, the market recovery is continue to take shape.
However, the recovery could be much stronger if housing reform sees immediate action, specifically the pursuit of more widespread principal reduction, which would provide the best return for taxpayers, argues Rep. Maxine Waters, D-Calif., attending the Bipartisan Policy Center Housing Commission Policy Forum Monday.
“With housing-related activities accounting for about 20% of our Gross Domestic Product, it’s truth that the return of a housing market that is both robust and sustainable is crucial to our economic recovery,” Waters explained.
She added, “In Washington, I’m hopeful that we can move beyond the partisan vitriol of the government shutdown and debt limit fights to make reform of our housing finance system a priority.”
Waters has been all but timid about her support for Rep. Mel Watt, D-N.C., to head the Federal Housing Finance Agency — Waters’ advocate nature led HousingWire to name her one of this year’s women of influence — voicing her concern in regards to Senators blocking a cloture vote on the nomination of the congressman.
However, Waters made it clear that the bigger issue is a lack of a permanent FHFA director since it’s critical to implementing housing reform.
The gigantic task at hand for both sides of the aisle and President Obama is tacking a $10 trillion housing finance market without rupturing the fragile, yet robust housing recovery.
In July, Democrats of the Financial Services Committee released a set of core principles for housing reform consideration to comeback the Republican’s proposal of the Protecting American Taxpayers and Homeowners Act.
The principles ranged from maintaining an affordable 30-year fixed-rate mortgage to ensuring that all financial institutions can equally participate in the market.
While Waters applauded the current proposals on the Congressional floor, she still believes more can be done.
As a result, she is preparing an alternative approach to these proposals that comprehensively address the issue of replacing the government-sponsored enterprises’ multifamily program.
“It will seek to address the perverse incentives created by Fannie Mae and Freddie Mac’s ownership structure of private shareholders, by ending the GSEs and creating new, cooperative-owned securities issuer,” Waters explained.
She continued, “Such a structure has many advantages, the primary among them that it tends to have lower risk than shareholder-owned firms.”
The proposal will also create an explicit government guarantee, paid for by the industry and used to capitalize an insurance fund while ensuring a stable secondary market in all economic environments.
These efforts will allow access to sustainable homeownership for creditworthy borrowers of all backgrounds and in all regions of the country by addressing the multifamily market to promote affordable and available rental options, Waters pointed out.
“We must ensure that reform of this complicated market is accomplished in a manner that provides opportunity to Americans on all income levels, protects taxpayers and consumers, and brings equity and accountability to all actors within our financial system,” the congresswoman concluded.