MBA CEO on the 9-year anniversary of GSE conservatorship

"GSE reform is of the utmost priority"

This week marked exactly nine years since the Federal Housing Finance Agency placed Fannie Mae and Freddie Mac into conservatorship. Will they make it to the 10-year anniversary?

David Stevens, president and CEO of the Mortgage Bankers Association, unwrapped this idea in a blog post, outlining the urgent need to reform the government-sponsored enterprises.

As explained on the FHFA’s website, “On September 6, 2008, FHFA used its authorities to place Fannie Mae and Freddie Mac into conservatorship. This was in response to a substantial deterioration in the housing markets that severely damaged Fannie Mae and Freddie Macs’ financial condition and left them unable to fulfill their mission without government intervention.”

But now nearly a decade later, they still remain in conservatorship.

From the blog:

Government control of these entities was supposed to be a temporary, stop-gap solution. It was never intended to last nearly a decade. Yet here we are.

In the subsequent years, as the housing market and the national economy began to recover, the FHFA, acting in its role as conservator, made a number of positive, administrative reforms to the GSEs: leveling guarantee fees; preventing special deals for individual lenders; creating the CSP; and working to create the single security, supporting liquidity and competition in the multifamily market, to name a few.

Stevens pointed out thought that Mel Watt, the director of the FHFA, won’t be there much longer, with his five-year term up next year.

“There is a very real risk that the next Director could have a very different view on how the GSEs should operate in support of the housing system,” said Stevens.

And with a new director comes a lot of uncertainty. In Watt’s opinion, housing finance reform should be left to Congress and conservatorship needs to end soon.

“I have said repeatedly, and I want to reiterate, that these conservatorships are not sustainable and they need to end as soon as Congress can chart the way forward on housing finance reform,” Watt said back in May.

“However, it is important for all of us to recognize that the conservatorships have led to numerous reforms of the enterprises and their operations, practices, and protocols that have been extremely beneficial to the housing finance markets and have reduced exposure and risks to taxpayers,” Watt continued.

Stevens agreed with this point in his blog, stating that the changes to the GSES “have been good for consumers, lenders and the market.”

To help in the reform process, Stevens pointed to the MBA’s comprehensive plans for reform the association released earlier this year. The 60-page white paper can be found here. “This [is] the most detailed paper that we think is out there on GSE reform. We think it can be used as a significant and important advisory document,” Stevens said at the time.

Stevens concluded his blog, stating, “After nine years of this untenable status quo, GSE reform is of the utmost priority. Congress has an obligation now to act to stabilize the housing finance system for the future and make it more resilient in economic downturns.” 

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