GSE REFORM - Feb. 8, 2019 - Roundtable Weekly

Senate Banking Committee Releases Housing Finance Reform Outline; Real Estate Coalition Working to Establish GSE Reform Principles  

Senate Banking Committee Chairman Mike Crapo (R-ID) on Feb. 1 released an outline for reforming the nation's housing finance system, including the Government Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac.  (Crapo Statement and Housing Reform Outline, Feb. 1)

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Senate Banking Committee Chairman Mike Crapo (R-ID) on Feb. 1 released an outline for reforming the nation's housing finance system, including the Government Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac
(Crapo Statement and Housing Reform Outline, Feb. 1)

  • Fannie and Freddie form the underpinnings of a $5.3 trillion financial market for single-family and multifamily mortgages.

  • Crapo's outline states, "The multifamily businesses of Fannie Mae and Freddie Mac will be sold and operated as independent guarantors."  The proposal outlines a new housing finance system that aims to: 

    • Reduce the systemic, too-big-to-fail risk posed by the current duopoly of mortgage guarantors

    • Preserve existing infrastructure in the housing finance system that works well, while significantly increasing the role of private risk-bearing capital

    • Establish several new layers of protection between mortgage credit risk and taxpayers

    • Ensure a level playing field for originators of all sizes and types, while also locking in uniform, responsible underwriting standards

    • Promote broad accessibility to mortgage credit, including in underserved markets  

  • The Committee has also tentatively scheduled a Feb. 14 nomination hearing on Mark Calabria as director of the Federal Housing Finance Agency (FHFA). Calabria is currently chief economist to Vice President Mike Pence.  The FHFA oversees Fannie Mae and Freddie Mac, which have been held in conservatorship since September 6, 2008.  (Wall Street Journal, Feb. 5)  
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    "Housing finance reform must appropriately balance taxpayer protections with the need to establish an efficient marketplace that can provide strong and sustained mortgage liquidity in single family and multifamily markets – as well as affordable housing," said Roundtable President and CEO Jeffrey DeBoer. 



  • White House Spokeswoman Lindsay Walters stated on Tuesday, "Housing finance reform is a priority for the administration. The White House expects to announce a framework for the development of a policy for comprehensive housing finance reform shortly."  She added the administration intends to work with Congress to formulate a reform plan that will address taxpayer risks and housing affordability. (Bloomberg, Jan. 29) 

House Financial Services Committee Chairwoman Maxine Waters (D-CA) is expected to oppose measures that seek to limit the government's role in the mortgage market. 

Industry Developing Principles for Reform  

The Real Estate Roundtable continues to work as part of an industry coalition to develop certain principles that would form the foundation of GSE reform legislation 

  • "Housing finance reform must appropriately balance taxpayer protections with the need to establish an efficient marketplace that can provide strong and sustained mortgage liquidity in single family and multifamily markets – as well as affordable housing," said Roundtable President and CEO Jeffrey DeBoer.  

"Reform should encourage the transfer of appropriate credit risk to the private sector, while building on the highly effective risk sharing mechanisms utilized in Fannie Mae's existing Delegated Underwriter Servicing (DUS) program and Freddie Mac's K Deals," DeBoer added.

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