Proposals to overhaul the US housing finance system set out by Senator Mike Crapo Friday have been welcomed by several industry stakeholders.
The Senate Banking Committee chairman’s outline for reform legislation includes many of the plans and principles that have been discussed by legislators, stakeholders, and thought leaders.
Senator Crapo (R-ID) says his plan would:
- Reduce the systemic, too-big-to-fail risk posed by the current duopoly of mortgage guarantors;
- Preserve existing infrastructure in the housing finance system that works well, while significantly increasing the role of private risk-bearing capital;
- Establish several new layers of protection between mortgage credit risk and taxpayers;
- Ensure a level playing field for originators of all sizes and types, while also locking in uniform, responsible underwriting standards
- Promote broad accessibility to mortgage credit, including in underserved markets Background.
“We must expeditiously fix our flawed housing finance system,” said Chairman Crapo. “My priorities are to establish stronger levels of taxpayer protection, preserve the 30-year fixed rate mortgage, increase competition among mortgage guarantors, and promote access to affordable housing. I invite my Senate and House colleagues, the Administration and all interested stakeholders to work together to enact this critically needed reform.”
Stable market with government guarantee
Among those who have welcomed the proposals is the Mortgage Bankers Association’s Robert D. Broeksmit, CMB, President and CEO.
"MBA welcomes the release of Chairman Crapo's principles for housing finance reform as a significant sign of his continued commitment to work toward finally ending the conservatorships of Fannie Mae and Freddie Mac and ensuring a stable and liquid market - with an explicit, paid-for government guarantee - for both single-family and multifamily mortgages."
The chairman of the National Association of Home Builders, Randy Noel, added that Sen. Crapo’s plan would maintain a limited federal backstop to the housing finance system. This was a proposal the NAHB recommended as critical.
“Momentum on overhauling the housing finance system is clearly growing, as the administration is also looking to move forward on this issue,” said Noel. “While a legislative solution will ultimately be required to accomplish comprehensive housing finance reform, NAHB looks forward to working with all interested stakeholders to move this process forward.”
Competitive and transparent marketplace
Ed DeMarco, President of the Housing Policy Council said that the proposals should lead the dialogue to a plan for sensible and balanced reform.
“Chairman Crapo has identified the critical issues to be resolved – safeguarding access to credit for low- and moderate-income households, protecting the government from unnecessary losses by putting private capital first, ensuring a competitive and transparent marketplace where all types of financial institutions may succeed, and generating funds to expand affordable housing opportunities for more American families,” said DeMarco.
The nonpartisan think tank Milken Institute says that on initial view the reforms have the potential to achieve the housing finance system reform principles that it supports.
“Chairman Crapo’s outline is important in that it builds upon last year’s active legislative debate and reflects the importance of maintaining serious housing finance reform momentum,” said Eric Kaplan, director of the Milken Institute Housing Finance Program. “We look forward to working with the Chairman, all Members of Congress, Administration officials, and industry participants to be helpful in the legislative effort that follows.”
NAR to discuss reform
The National Association of Realtors will hold its first-annual Policy Forum at the Grand Hyatt in Washington on February 7, and will bring together some of the most engaged and influential figures in America's housing finance system.
This will include Dr. Susan Wachter, Professor of Real Estate and Finance at the University of Pennsylvania, and Dr. Richard Cooperstein, head of Risk Management at Andrew Davison and Company, Inc., who will unveil a new, comprehensive vision for GSE reform.
"NAR and our members remain committed to ensuring the GSEs continue providing liquidity and stability in the mortgage market for decades to come. Next week's forum will showcase NAR's leadership to advance reforms that are most favorable to consumers, taxpayers and our overall economy."
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