WASHINGTON — More than two dozen industry groups warned Federal Housing Finance Agency acting Director Joseph Otting not to pursue steps reducing the scope of the government-sponsored enterprises that could upset the mortgage market.
The Mortgage Bankers Association and the National Association of Realtors, along with 26 other organizations, told Otting in a letter Friday that he should carefully consider any administrative actions before acting to reform Fannie Mae and Freddie Mac without Congress. Recent comments attributed to Otting signaled the administration was planning GSE reform independent of legislation.
They said the FHFA should not curb the GSEs' footprint unless there is evidence that the primary mortgage market would be able to stand in for the mortgage giants.
“Recognizing the vital role that the GSEs currently play, it is critical that any administrative reforms do not disturb essential functions in the secondary mortgage market,” the letter said. “Policymakers must take great care that actions to institute reforms to the GSEs are prudently developed and implemented over a sensible time horizon.”
In particular, the groups recommended that the FHFA use its role as a regulator to codify and establish policies that ensure liquidity, access to affordable credit, equal secondary market access and pricing for all lenders, and a sustainable transfer of appropriate credit risk to the private sector.
The letter also outlined principles that the 28 organizations believe are essential to reform, including borrower impact, taxpayer protection and market structure, and encouraged the FHFA to weigh these principles against the potential impacts of any changes.
“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,” the groups said.
The letter also underlined the industry groups’ belief that congressional reform should ultimately be enacted, saying that comprehensive legislation 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.”
The letter comes more than a month after Otting
His comments sparked confusion across the industry as well as in Congress, with some
“To us, the letter is a warning to Acting FHFA Director Joseph Otting to refrain from taking rash steps to shrink Fannie and Freddie in his final few weeks in charge,” Jaret Seiberg, an analyst with Cowen Washington Research Group, said in a note. “It also appears intended to put Team Trump and incoming FHFA Director Mark Calabria on notice that a broad coalition will fight any effort to materially limit the role of Fannie and Freddie in advance of congressional action.”