With Congress and the Administration now looking at several proposals to wind down Fannie Mae and Freddie Mac and encourage greater participation in the mortgage finance system among private institutions, NAHB has unveiled a comprehensive framework for housing finance reform that we will advocate in ongoing negotiations.
The plan, which was developed through a specially appointed NAHB working group and approved by NAHB’s Board of Directors at its recent meeting in Orlando, stresses that any transition away from the current housing finance system must be done in a careful and deliberate manner to avoid further disruptions to an already fragile market. It is also built upon the recognition that, as the private market assumes a greater role in the mortgage marketplace, it is absolutely vital to maintain an appropriate level of government support to preserve financial stability, promote investor confidence and ensure liquidity and stability for homeownership and rental housing. In keeping with these core directives, NAHB’s plan seeks to:
- Include private, federal and state sources of housing capital.
- Offer a reasonable menu of sound mortgage products for both single-family and multifamily housing that is governed by prudent underwriting standards and adequate oversight and regulation.
- Transition Fannie Mae and Freddie Mac to a new mortgage securitization system for single-family and multifamily conventional mortgages.
- Consider the 12 regional Federal Home Loan Banks for this securitization role.
- Phase in the new system over time and allow Fannie and Freddie to remain operational until the alternative system is fully functioning.
- Provide a federal backstop to ensure that conventional 30-year home loans and adjustable rate mortgages are available at reasonable interest rates and terms.
- Structure the federal support to the conventional mortgage market of the future through a privately funded insurance fund similar to the FDIC’s backing of the fund that insures savings deposits. This will allow the government to be the insurer of last resort in order to reduce the risk to taxpayers.
- Continue the role of the federal government housing agencies (HUD, FHA, VA, USDA and Ginnie Mae).
- Expand the role of the Federal Home Loan Banks in the housing finance system.
- Restart a carefully regulated fully private mortgage-backed securities market through reforms to the securities ratings system to remove conflicts of interest that led to problems in the past.
- Repair other flaws that produced the housing boom and bust by closing the gaps in standards and oversight that allowed and facilitated the improper and illegal activities in financial and mortgage markets.
By including a strong federal backstop for both single-family and multifamily mortgage markets and ensuring a consistent stream of mortgage credit, NAHB believes this plan will produce a sound housing finance system that provides a stable and affordable supply of credit for home buyers and rental housing. Going forward, NAHB will be working with the Administration, Congress and policy stakeholders to make this goal a reality, and we have already begun to promote our plan among lawmakers and the media. For more, read NAHB’s white paper containing our comprehensive plan for housing finance reform and see our recent public statement. Contact: Chellie Hamecs (800-368-5242 x8425)