10 years ago this month – the Federal Housing Finance Agency (FHFA) placed Fannie Mae and Freddie Mac into conservatorship as the financial crisis continued to disrupt global markets. At the time, FHFA did it “to help restore confidence in Fannie Mae and Freddie Mac, enhance their capacity to fulfill their [housing] mission, and mitigate the systemic risk that has contributed directly to the instability in the current market.”
A decade later, America’s financial and mortgage lending systems look vastly different, thanks in part to safe lending and regulatory policy reforms supported and advanced, in part, by Realtors®. Home prices are at or near record highs in many markets, while mortgage default and foreclosure rates are at historic lows.
In the meantime, the federal government’s conservatorship of Fannie Mae and Freddie Mac continues, with no long-term reform solutions on the horizon.
“Realtors support a methodical, measured approach to reform that will put Fannie Mae and Freddie Mac on the path to sustainability,” says National Association of Realtors (NAR). President Elizabeth Mendenhall. “First and foremost, we urge policymakers in Washington to prioritize GSE (government-sponsored enterprise) reforms that will protect taxpayers, provide liquidity to the broad national market, and promote stability in the housing market, particularly during times of economic distress.”
There is no easy solution to move on from government operation of Fannie and Freddie, and agreement is difficult to achieve in Washington.
However, NAR believes government authority over Fannie Mae and Freddie Mac should be replaced by private capital. This new oversight entity should be subject to tighter regulations and revenue generation, and commit to fulfilling its mission as Congress intended.
NAR also believes that a future housing finance system must ensure that there is mortgage capital available in all markets – at all times and under all economic conditions. It also believes that it’s critical to secure an explicit government guarantee in the secondary market, which should ensure the availability of long term, fixed-rate mortgage products (i.e. the 30-yr fixed-rate mortgage).
The test of any new system will be how it performs during economic downturns.
NAR says Realtors will continue to champion the importance of affordable mortgage capital for creditworthy Americans, particularly during economic downturns. It says that’s a vital role that a fully private entity could not fill, and a reason why long-term GSE reform remains such a critical priority, even during times of U.S. economic expansion.
“Ultimately, without the government’s support of the GSEs and FHA-insured loans, private capital for mortgage lending would dry up during economic downturns, leaving homeowners and home buyers with few – or no – options,” Mendenhall says. “This situation could be potentially devastating for the American economy, but fortunately it is avoidable. And it’s why NAR will continue to advocate for Congress and the administration to enact smart, comprehensive housing finance reforms that protect the nation’s housing market.”
On Wednesday, the National Association of Realtors, in conjunction with approximately 30 organizations that comprise the GSE Reform Coalition, sent a letter to the administration and Congressional leaders urging reforms to GSEs that will protect American taxpayers while protecting critical GSE functions.
“Only through such efforts can we ensure an affordable, accessible housing finance system that works for American homeowners and renters alike,” the letter reads.
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