Sixteen housing and financial trade associations have joined forces to issue guidance to policy makers on housing finance reform.  The document, "Principles for Restoring Stability to the Nation's Housing Finance System." was issued on Monday and calls on regulators and government officials to exercise care in debating the options for restoring strength and vitality to the housing finance market.

Issued to congressional and administration offices, the statement offers a set of four overriding principles that should guide legislators and regulators in putting forth steps to repairing the nation's housing finance system.  The principles suggest that government officials must cognizant that a stable housing sector is imperative for a healthy economy.  The evolution of the  housing finance market necessitates a proper balance of private capital as the dominant source of mortgage credit, while maintain a "predictable" government role to sustain investor confidence.  In order to avoid unnecessary instability, the groups call on changes to the finance system to be established over a reasonable period of time to allow for the housing finance system to transition effectively.

The document reminds officials that the industry groups stand committed to maintaining an on-going dialogue with them and consumer groups to accomplish the stated goals. 

The full text of the document, along with the list of industry groups involved, follows:

Principles for
Restoring Stability to the Nation’s Housing Finance System

March 28, 2011

The nation’s housing finance system is at a historic crossroad. As policymakers debate options to restore vitality, integrity and stability to the secondary mortgage market, including an appropriate role for the federal government in supporting homeownership and rental housing, it is essential that care is taken in weighing the choices ahead. The policy decisions in this area will have profound implications for the nation’s economic recovery and for generations of future homebuyers and renters, with broad ranging social and economic consequences.

The undersigned organizations, representing a variety of stakeholders in single- and multifamily housing, believe the following principles should help guide efforts to restore and repair the nation’s housing finance system:

  • A stable housing sector is essential for a robust economic recovery and long-term prosperity. Housing, whether through homeownership or rental, promotes social and economic benefits that warrant it being a national policy priority.
  • Private capital must be the dominant source of mortgage credit, and it must also bear the primary risk in any future housing finance system.
  • Some continuing and predictable government role is necessary to promote investor confidence and ensure liquidity and stability for homeownership and rental housing.
    Changes to the mortgage finance system must be done carefully and over a reasonable transition period to ensure that a reliable mortgage finance system is in place to function effectively in the years ahead.

Private investment capital is critical for a robust and healthy mortgage marketplace, and the current government-dominated mortgage system is neither sustainable nor desirable. However, investors must be confident that they understand the risks and rules that can affect them. As policymakers move forward with Dodd-Frank Act rulemakings and similar regulatory efforts, it will be important to provide clarity and certainty to the marketplace in a manner that promotes recovery and growth. As such, the future mortgage system should seek to ensure a workable balance between sound underwriting principles, consumer protection and the need for responsible innovation and risk-taking.

As critical as it is to attract private money to the mortgage markets, an appropriate and clearly defined role for the government is essential to preserving financial stability. Government support through various insurance and guarantee mechanisms is especially important to facilitate long-term fixed-rate mortgages, affordable financing for low- and moderate-income borrowers, and financing rental housing in all parts of the country including rural areas. While the goal should be to move toward a largely private secondary market, the private and public sectors should work as partners in creating a variety of financing options to ensure the availability of safe, stable, and affordable financing.

Accomplishing all of these goals will require an on-going dialogue between policymakers and other key stakeholders, including industry and consumer groups. Our organizations stand committed to being part of this process.

American Bankers Association
American Financial Services Association
Community Mortgage Banking Project
CRE Finance Council
Housing Policy Council of the Financial Services Roundtable
Independent Community Bankers of America
Manufactured Housing Institute
Mortgage Bankers Association
Mortgage Insurance Companies of America
National Apartment Association
National Association of Home Builders
National Association of Realtors
National Council of State Housing Agencies
National Multi Housing Council
Real Estate Roundtable
Securities Industry and Financial Markets Association