MBA-Led Coalition Urges FHFA to Make Market Stability Priority in GSE Reform
The Mortgage Bankers Association, joined by 27 other organizations representing a cross-section of consumer and industry organizations, sent a letter Friday to Federal Housing Finance Agency Acting Director Joseph Otting on priorities for preserving access and affordability when undertaking administrative reforms to Fannie Mae and Freddie Mac.
The letter, Administrative Reforms to Fannie Mae and Freddie Mac: Priorities for Preserving Access and Affordability, said GSE reform must seek to further two key objectives: 1) preserving what works in the current system, while 2) maintaining stability by avoiding unintended adverse consequences for borrowers, lenders, investors or taxpayers.
“We recognize that the GSEs’ long-term ability to support the housing market, without exposing taxpayers to excessive risk, depends on the outcome of efforts to permanently address the structural problems that existed prior to the financial crisis,” the letter said. “We believe that comprehensive legislative reform, including an end of conservatorship, is ultimately necessary in order to codify structural changes that ensure safety and soundness and provide the certainty needed for private capital to establish a more reliable presence in housing finance.”
MBA President and CEO Robert Broeksmit, CMB, said he two key objectives outlined–preserving what works in the current system and maintaining stability in the secondary mortgage market–have been at the core of MBA’s thinking on GSE reform for more than a decade. “Likewise, the principles we lay out are consistent with those developed by several task forces that MBA has convened in recent years to look at a variety of aspects related to the future of the GSEs and the secondary mortgage market,” he said.
Broeksmit said the letter makes clear whatever steps that FHFA and the Trump Administration might take administratively on GSE reform, they should “not preclude congressional action on housing finance reform. Only through legislative action can policymakers make the structural changes necessary to ensure long-term safety and soundness and provide the certainty necessary for private capital to establish a more reliable presence in housing finance.”
The letter said any changes to the GSE footprint should be based on the most robust, data-driven analysis possible of potential impacts. This analysis should be multidimensional, assessing the extent to which such changes would impact mortgage pricing/costs and access to affordable housing, especially for middle-income and underserved borrowers/markets. This analysis should also consider impacts on the broader economy.
The coalition recommended through rulemaking and other administrative actions, FHFA should establish policies that ensure a continuation or expansion of:
–A liquid national market with broad and fairly-priced access to affordable credit and improved infrastructure for the single-family secondary market;
–Support for strong and sustained liquidity in the multifamily rental market;
–Equal secondary market access and pricing for all lenders, regardless of size or volume; and
–The sustainable transfer of appropriate credit risk to the private sector.
“A well-functioning housing finance system should provide consistent, affordable credit to borrowers across the nation and through all parts of the credit cycle without putting taxpayers at risk of a bailout,” the letter said. “Lenders and other market participants should have confidence that they can access the secondary market on a level playing field with their competitors, through clear and transparent standards that do not discriminate based on charter type, asset size or loan volume, while investors should feel confident that channeling long-term capital into the housing market is sustainable. We firmly believe our principles support these objectives. We urge policymakers to take these principles into account to ensure that access and affordability are preserved under the current, and any future, housing finance regime.”
