Sen. Elizabeth Warren, D-Mass., amplified the need to reform the Federal Housing Administration, Fannie Mae and Freddie Mac all at the same time to shrink the government’s footprint in the mortgage finance market. 

Warren questioned a panel of housing experts during a hearing titled, “Addressing FHA’s Financial Condition and Program Challenges,” at the U.S. Senate Committee on Banking, Housing & Urban Development on Thursday, commenting that the FHA is not the only large actor receiving taxpayer backup.

“We’ve got Fannie Mae and Freddie Mac that are creating a huge problem and to some extent the Veteran’s Administration as well as when we think about underwriting and insurance pricing,” Warren said. 

Professor of International Economic Policy Phillip Swagel of the University of Maryland School of Public Policy agreed with Warren, noting that changes at the FHA would effect both government-sponsored enterprises.

Swagel noted that you can’t fix the solvency of the FHA and not worry about the agency’s mission.

On a similar note, President David Stevens of the Mortgage Banker’s Association urged the reform of all three firms, specifying that it should be done “in concert with each other.”

“One move shouldn’t create an arbitrary bubble on the other end of the scale,” Stevens said. 

However, the biggest challenge that remains is getting policy regulators on board at the same time to shrink FHA and the GSEs dominance in the mortgage industry.

President Teresa Bazemore of Radian Guaranty noted that an important difference between the FHA and the GSEs is that both Fannie Mae and Freddie Mac have private capital in the form of mortgage insurance and until the private market can make a significant comeback in the market reform is a long ways off. 

Similarly, President Sarah Wartell of the Urban Institute agreed with Bazemore, noting that until private capital is ahead of the government, ensuring monetary stability in the mortgage market, reform consensus will not emerge.

“To constrain FHA’s box without knowing the private capital amount it will delay the date of a reasonable reform and allow loans to slip through the cracks,” Wartell said.

Regardless, Warren noted that even if a political consensus doesn’t emerge in the near future, a continued drive towards reform of the FHA and GSEs is needed.

“We have to keep pushing,” the senator concluded.

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