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Republicans are unlikely to push the ball forward on reform of the federal housing agencies, but Congress has a number of other opportunities to make changes that will encourage mortgage lending.
November 13 -
Sen. Richard Shelby is expected to become chairman of the Senate Banking Committee next year after Republicans seized enough seats to take control of the chamber. But the Alabama Republican will face a time-crunch to get his agenda through.
November 4
WASHINGTON Housing and Urban Development Secretary Julian Castro is trying to restart the debate over the future of Fannie Mae and Freddie Mac.
"We need legislation to open up the charters and set up a new system that will provide the certainty needed for a competitive marketplace one where private capital is put ahead of the taxpayer," Castro said, according to talking points of a speech Castro gave Friday to the California Realtors Association.
The new HUD secretary is seeking to spark a conversation about housing finance reform before the start of a Republican-controlled Congress to see if various interest groups can reach a consensus.
"I know there are some skeptics out that are concerned about what this means for the pricing of mortgages and ensuring a level playing field for all communities," Castro said. "Let's take this time before the start of the new Congress and talk about these issues. Let's see if we can agree on a path forward that puts the housing finance system on more stable footing."
Some consumer and low-income housing group were unhappy with the affordable housing provisions in the Johnson-Crapo housing reform bill. The bill, sponsored by Senators Tim Johnson, D-S.D., and Mike Crapo, R-Idaho, was passed by the Senate Banking Committee but never made it the full Senate for a vote.
The two government-sponsored enterprises have been in conservatorship since 2008.
A secondary market "system dominated by Fannie and Freddie in conservatorship is simply not desirable in the long run," according to the HUD secretary.
Separately, former Federal Housing Finance Agency Director Edward DeMarco was the keynote speaker at an American Enterprise Institute event last Thursday on the future of Fannie and Freddie.
He also spoke about the need for GSE reform legislation. "Congress and the President need to enact legislation to end the conservatorships, extinguish the GSE charters and establish the legal framework for a new secondary mortgage market," DeMarco said.
He noted that the common securitization platform the GSEs are working on can serve as the "operational backbone of the mortgage securitization market in a post-Fannie and -Freddie world."
To get housing finance reform to the "finish line," he said, policymakers must decide what kind of subsidies are needed to support homeownership.
He hopes the new system will "ensure that families can get a house they can afford," DeMarco said. Policymakers should move away from low-down-payment loans and "focus more on equity and sustainability in mortgage lending."
Prior to 2008, the GSE pricing models "resulted in creditworthy borrowers subsidizing less creditworthy borrowers," the former GSE regulator said.
"We must reconsider making highly leveraged long-term loans to families with weak balance sheets and volatile and uncertain incomes. The damage we have inflicted on such well-intended and ill-advised policies has been substantial."
