Joseph Murin, former president of Ginnie Mae from 2007 to 2008 under former President George W. Bush, is pretty confident that the 115th Congress can finally tackle GSE reform, he told the Mortgage Bankers Association in this MBA Insights piece.
When asked if he is hopeful or less hopeful on the prospects of GSE reform happening in the 115th Congress, Murin responded:
I'm hopeful, but I believe the real question is "how significantly will the GSEs be improved?" Simply making a few superfluous adjustments won't be enough. It's time for us to decide how much of a role the federal government should have in encouraging homeownership. That will take extensive debate and real work. I'm not sure Congress has the political stomach for that right now. So am I hopeful that there will be GSE "reform" in this Congress? Sure. In fact, I'm pretty confident. I'm far less confident, however, that we will fully address the purpose and role of the GSE in federal housing policy.Sponsor Content
In several guest blogs on HousingWire, Murin goes into detail on how the government-sponsored enterprises should be reformed.
Murin advocated in the past that the prime example of what Fannie Mae and Freddie Mac reform should look like is already out there. He touched on this again in the MBA piece.
I may be a bit biased, but I think it should remain significant, if not even growing a bit. I've repeatedly advocated a GSE reform model that replaces Freddie and Fannie with a Ginnie-like model. I believe the Ginnie guarantee is more practical and safer in times of economic challenge. I also believe that government-backed loans like the VA or FHA will continue to be workhorses in the housing market.
I suppose Ginnie's role will depend in large part on what we decide the federal government's role should be in supporting homebuyers. If we determine it should be a sizeable role, then the Ginnie model has proven itself over and over as a fantastic way to inject liquidity into housing markets when needed as well as stabilizing anxious investment communities.
For where to start, Murin suggested that Fannie Mae and Freddie Mac should at least be allowed to partially recapitalize.
Freddie and Fannie are too important to our economy to operate without reserves. Even a minor financial blip on the radar threatens to take us right back to discussion of federal bailout. So let's at least allow the GSEs to protect themselves as a starting point.
Fannie Mae and Freddie Mac must reach a 0% capital buffer by 2018. However, Freddie Mac CEO Donald Layton recently told HousingWire, “Capital is a measurement of risk.”
His comment indicated that Freddie Mac is not facing elevated levels of risk to the guarantee business model, save for a larger economic downturn in the U.S. economy.
That's why Layton is perfectly comfortable with allowing the FHFA execs to express concerns at the 0% capital buffer requirements.