The Treasury Department today issued a much-anticipated blueprint for housing finance reform that includes providing explicit and paid-for federal government support for the secondary market, ending the more-than-decade-long conservatorships of Fannie Mae and Freddie Mac and promoting greater private-sector competition in housing finance. Meanwhile, the Department of Housing and Urban Development released recommendations on reforms to the Federal Housing Administration and Ginnie Mae.
American Bankers Association President and CEO Rob Nichols welcomed the news. “We are pleased that the Treasury plan reflects many of the reform principles that ABA has championed, including an explicit, fully priced and fully paid for guarantee as well as protection for taxpayers,” he said. “We are committed to working with the administration and Congress to develop an accessible and sustainable housing finance system that fosters equitable and affordable access to all.”
Treasury emphasized that it prefers comprehensive legislative action, which despite many proposals has eluded lawmakers to date. But the department said that reform—much of it conducted under the Federal Housing Finance Agency’s current authorities—can and should begin now. Among the legislative recommendations were: an explicit, paid-for Ginnie Mae guarantee for qualified mortgage-backed securities; the chartering of new guarantors to compete with Fannie and Freddie; replacing the GSEs’ statutory affordable housing goals with a “more efficient, transparent and accountable mechanism”; more flexibility for FHFA to set GSE capital requirements; and stricter underwriting requirements on GSE-eligible mortgages.
Pending any legislation, Treasury said that the current GSE backstops should remain in place to ensure stability and that the GSEs should be recapitalized as soon as practicable to minimize taxpayer exposure to losses. Other administrative recommendations included: helping the GSEs rebuild and maintain capital; harmonizing mortgage-related capital requirements for GSEs with those for banks; and letting the Consumer Financial Protection Bureau’s Qualified Mortgage patch expire. The reports were issued pursuant to a March executive order. For more information, contact ABA’s Joe Pigg.