With the 10-year anniversary of the government taking Fannie Mae and Freddie Mac into conservatorship nigh upon us, a coalition of the housing industry’s largest trade groups, affordable housing advocates, and others is calling on the Trump administration and Congress to enact permanent reforms to the government-sponsored enterprises.
In a letter signed by the Mortgage Bankers Association, the National Multifamily Housing Council, the National Association of Realtors, the United States Conference of Mayors, and more than two dozen others, the groups write that many of the GSE reforms enacted after the housing crisis have served to stabilize the housing market, but the groups worry that the newfound stability could be undone without a permanent solution.
“Reforms put in place during conservatorship have better positioned the GSEs to continue to play a vital role in facilitating mortgage liquidity. Such reforms include pricing parity across lenders, the transfer of risk off of taxpayer shoulders, a new infrastructure for the single-family secondary market, and support for strong and sustained liquidity in the multifamily rental market,” the groups write.
“But none of these reforms are etched in stone, and thus the stability of the housing market is more illusory than appearances may initially indicate,” the groups continue. “The GSEs’ long-term ability to support the housing market, without exposing taxpayers to excessive risk, depends on the outcome of efforts to permanently reform the structural problems that contributed to the crisis.”
According to the groups, “certainty” in the housing finance world will only come by enacting reforms and ending the conservatorship of Fannie and Freddie.
Only then will the private market “be able to establish a more permanent and reliable presence in housing finance,” the groups write.
Under the Trump administration proposal, Fannie and Freddie would be converted to “fully private entities.”
According to the proposal, competition to the “duopolistic role” of the privately owned GSEs would be an “essential” piece of the reform plan in order to “decrease moral hazard and risk to the taxpayer.”
Under the plan, Fannie, Freddie, and “other competitive entrants” would have access to an “explicit Federal guarantee” for mortgage-backed securities they issue, which is only “exposed in limited, exigent circumstances.”
According to the plan, that explicit guarantee would be “on-budget and fully paid-for.”
Add in the fact that the Trump administration could theoretically have its own people in place at the Federal Housing Finance Agency and both of the GSEs (as discussed here) and real GSE reform could finally be the offing.
If that’s the case, the housing groups want things to be done smartly.
“Indeed, as policymakers consider options to remove the GSEs from conservatorship, retain adequate capital to support GSE operations and foster a system that relies more heavily on private capital, there is a pressing need to ensure that the existing progress is cemented rather than cast aside,” the groups write.
“Any efforts to change the role played by the GSEs must contain safeguards against higher costs or other market disruptions that reduce access to mortgage credit in both the single-family and multifamily markets,” the groups continue. “They must also include enforceable mechanisms to serve the entire market of renters and qualified homebuyers, including underserved markets and manufactured housing.”
The groups go on to state that they believe that a “well-functioning housing finance system” should be able to provide “consistent, affordable credit” to borrowers of all shapes and sizes.
That includes making credit “broadly available” through “responsible” lenders in both the single-family and multifamily housing markets.
“Lenders and other market participants should feel confident that they can access the secondary market on a level playing field with their competitors, through clear and transparent standards that do not discriminate based on charter type, asset size or loan volume,” the groups write.
“Investors should feel confident that channeling long-term capital into the housing market is sustainable. Consumers should feel confident that they can obtain affordable mortgage credit and that they can secure decent housing that meets their needs, whether they rent or own, in both high- and low-cost markets,” they continue.
To achieve these objectives, the groups write, the administration and Congress must take a pragmatic approach to reform efforts to ensure that there are no massive bumps in the road.
“Housing is simply too important to our national economy and our local communities to risk disruption of the system by which it is financed,” the groups write.
“Together, we urge policymakers to lock in recent reforms to the GSEs and complete the necessary additional reforms to protect taxpayers, provide liquidity and promote stability while taking care not to roll back aspects of the GSEs’ operations that are supporting the foundation of the housing market,” the groups conclude. “Only through such efforts can we ensure an affordable, accessible housing finance system that works for American homeowners and renters alike.”
The letter is signed by the following groups:
Asian Real Estate Association of America
Center for Responsible Lending
Community Home Lenders Association
The Community Mortgage Lenders of America
Credit Union National Association
Enterprise Community Partners
Habitat for Humanity International
Housing Partnership Network
Independent Community Bankers of America
Leading Builders of America
Local Initiatives Support Corporation
Manufactured Housing Institute
Mercy Housing Lakefront
Mortgage Bankers Association
National Apartment Association
National Association of Affordable Housing Lenders
National Association of Home Builders
National Association of Realtors
National Council of State Housing Agencies
National Housing Conference
National Housing Trust
National Multifamily Housing Council
Real Estate Services Providers Council
The Realty Alliance
Stewards of Affordable Housing for the Future
U.S. Mortgage Insurers
United States Conference of Mayors
Up for Growth Action