New Vision for Fannie Mae and Freddie Mac

On February 7th, the NAR held their first annual Policy Forum at the Grand Hyatt in Washington, DC. This forum included dozens of industry stakeholders and hundreds of invested attendees who want to be a part of the reform that Congress and the Federal Housing Finance Agency (FHFA) are proposing for government sponsored enterprises. Two of these GSEs, Federal National Mortgage Association (Fannie Mae) and Federal Home Loan Mortgage Corporation (Freddie Mac), are extremely important players in the housing and tax industry. They were created in order to improve the flow of credit in the housing market, while also reducing the cost of that credit. NAR’s proposal was presented at this forum by co-authors Richard Cooperstein, head of Risk Management at Andrew Davison and Company and Susan Wachter, Professor of Real Estate and Finance at the University of Pennsylvania.

The government is planning on ending conservatorship of these two GSEs, which means that the government will no longer be controlling these private corporations. They originally were placed into conservatorship in 2008 during the subprime mortgage crisis and have been congressionally charted since. Today, Fannie Mae and Freddie Mac have a stronger regulator in the FHFA and are subject to Congressional oversight. They are restricted in the products they can purchase, the size of their retained portfolios and their ability to lobby.

This forum was one of the first pivotal steps in determining the future of these GSEs, including years of research and collaboration between NAR and policymakers. NAR’s research is intended to provide a sensible solution to the challenges facing the housing finance system by prioritizing and assuring a liquid mortgage market for Middle America and underserved borrowers. Unlike a recapitalization and release plan, NAR’s vision gives policymakers a culpable framework that minimizes costs to consumers, protects taxpayers and promotes housing affordability and accessibility across America.

NAR President John Smaby believes this forum was an important step in crucial reform we wait to see from Congress, “Our hope is that this research will help provide Congressional leaders and administration officials with a credible, deliberate framework as they work to secure reforms that will benefit taxpayers, consumers, and the American economy. Ultimately, ensuring the GSEs continue providing liquidity and stability in the mortgage market remains NAR’s priority during these discussions.”

A critical part of this forum was to identify where competition does and does not work. “By addressing the imperfections in the market for housing finance, we can increase competition of private capital to invest in mortgages, keep markets more stable in times of stress, and stay mission-focused,” co-author Richard Cooperstein noted at the forum. Co-author Susan Wachter added, “GSE reform is the critical, unfinished business of the Great Recession; we believe the shareholder-owned regulated utility we propose will protect taxpayers and ensure the fulfillment of the mission to serve the nation for the future.”

NAR will continue the push to maintain broad consumer access and protect the 30-year fixed rate mortgage as this reform pushes forward and conservatorship likely comes to an end. Stay tuned as we continue to follow this story as it progresses.

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