Top regulators: Congress needs to act on housing finance reform

by Ryan Smith27 Jun 2016
Leaders of the government’s top regulatory agencies are urging Congress to take on housing finance reform, saying that they are “approaching the limits” of their ability to act under the current system, according to a HousingWire report.

The Financial Stability Oversight Council – whose members include Treasury Secretary Jacob Lew, Consumer Financial Protection Bureau Director Richard Cordray and other top regulators – released its annual report last week. In the report, the DSOC said that Congress needed to take the lead on housing finance reform in order to grant stability to the housing finance system, HousingWire reported.

“While regulators and supervisors have taken great strides to work within the constraints of conservatorship to promote greater investment of private capital and improve operational efficiencies with lower costs, federal and state regulators are approaching the limits of their ability to enact wholesale reforms that are likely to foster a vibrant, resilient housing finance system,” the FSOC stated. “Housing finance reform legislation is needed to create a more sustainable system that enhances financial stability.”

The FSOC noted that its constituent regulators had made progress on housing finance reform, pointing out changes to mortgage regulations and the reduction of Fannie Mae and Freddie Mac’s retained portfolios by more than 50% of their 2008 levels.

But Congress needs to do its part, the FSOC insisted.

“Notwithstanding the progress, the GSEs are now into their eighth year of conservatorship,” the FSOC stated.
 

COMMENTS

  • by | 6/27/2016 7:39:15 AM

    Fannie and Freddie did not cause the housing crisis. Mortgage mortgages from TBTF banks with default rate as high as 30% is the root cause. In fact, the Fannie and Freddie model is proven and extremely cost efficient (at about 0.15% overhead). It ensures liquidity to the mortgage market and low mortgage payment to millions of US households for decades.

    Any other alternative will imply an extra 1-1.5% monthly mortgage payments. And, the so-called private market alternative is to return the mortgage market to the TBTF banks which is high risk. During the housing crisis, all private funds suddenly disappear.

    Unless we are absolutely clear that the alternative is better than the current model, we should not replace Fannie & Freddie.

  • by | 6/27/2016 8:46:44 AM

    Housing Finance Reform is code for replace Fannie Mae & Freddie Mac. There is no other cost effective alternative to the twins and handing their business over to the banks would be a disaster. Hopefully we learned that from 2008. Banking execs have infiltrated our government, are writing/directing our legislation and creating a huge conflict of interest problem that will only get worse until sterilization is put into effect to purge them from the system.

  • by TH911 | 6/27/2016 9:05:27 AM

    Fannie & Freddie did not cause the housing crisis, but they are responsible for doing nothing to prevent it. It took Ed Demarco alerting them to the damage manipulated LIBOR did to the GSEs after FHFA assumed conservatorship. And it took shareholder litigation to expose systemic risk assumption and inadequate risk management controls under pre-conservatorship management.

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