March 11, 2019
Coalition on GSE Reforms
NAR, along with 27 other industry groups, recently sent a letter to Federal Housing Finance Agency (FHFA) Acting Director Otting outlining administrative reforms to Fannie Mae and Freddie Mac that prioritize preserving access and affordability in the mortgage market. The letter was developed after months of collaboration on essential principles that maintain and enhance the stability and liquidity of the housing finance system based on the potential impact on borrowers, taxpayers, and market structure dynamics.
Recognizing the GSEs’ role in supporting the housing market, the letter emphasizes the need to decrease taxpayers’ exposure to excessive risk, preserving what works in the current system, and maintaining stability by avoiding unintended adverse consequences for borrowers, lenders, and investors. As the letter states, 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.
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….” While legislative reform is still necessary to end conservatorship and codify structural changes that ensure safety and soundness of any future system, the principles delineated in the letter promote smart administrative reforms that build on the existing system for the benefit of the broader housing market and industry.
This broad coalition effort is one of the many ways NAR is continuing to advocate for necessary reforms to the secondary mortgage market. Last month NAR debuted a new vision explaining a path forward to promote a reliable and affordable source of mortgage capital for American consumers. The vision includes:
- Leveraging reforms and innovations implemented since the crisis while completing the process with instrumental updates for a fully functioning liquid market.
- Promoting competition in the secondary market through proven structures to correct market failures.
- Preserving the 30-year fixed rate mortgage and focusing the mission on liquid secondary markets for Middle America and underserved borrowers.
- Minimizing the cost to consumers in normal and stress periods while maximizing access for creditworthy borrowers.
- Protecting taxpayers by using private capital.
- Maintaining simplicity in the transition while avoiding market disruptions.