Roundtable Weekly
Industry Coalition Promotes GSE Reform Principles; Senate Banking Committee Advances New FHFA Director
March 1, 2019

The Real Estate Roundtable and 27 other industry organizations today submitted principles for reforming the Government-Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac, which underpin the multi-trillion-dollar financial market for single-family and multifamily mortgages. (GSE Reform Coalition letter, March 1)

The Real Estate Roundtable and 27 other industry organizations today submitted principles for reforming the Government-Sponsored Enterprises (GSEs)

  • "We believe that comprehensive legislative reform, including an end of conservatorship, 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," according to the comments.
  • The letter emphasized that compelling evidence must show the private market is capable of an expanded role before efforts are made to reduce the GSEs' current housing finance footprint. "Ultimately, we believe any reform, be it administrative or legislative, must seek to further two key objectives: 1) preserving what works in the current system, while 2) maintaining stability by avoiding unintended adverse consequences for borrowers, lenders, investors, or taxpayers."    
  • Fannie and Freddie recently announced they will pay a combined $4.7 billion in dividends to the U.S. Treasury Department.  The government took control of the two GSEs in September 2008 during the financial crisis.  (Reuters, Feb. 14)
  • The GSE coalition reform principles were sent to Acting Federal Housing Finance Agency (FHFA) Director Joseph Otting and Washington policymakers days after the Senate Banking Committee advanced the nomination of Mark Calabria as FHFA Director.  Calabria, currently chief economist to Vice President Mike Pence, would lead the agency that oversees the GSEs.  A vote to approve Calabria now moves to the full Senate, where it is expected to pass. (Housing Wire, Feb. 26 and Senate Banking Committee nomination hearing, Feb. 14) 
  • The coalition states in today's letter that FHFA should establish policies that ensure a continuation or expansion of: 

    The  coalition states that FHFA should establish certain policies to support the continuation or expansion of a robust housing market.

    • A liquid national market with broad and fairly-priced access to affordable credit and improved infrastructure for the single-family secondary market;
    • Support for strong and sustained liquidity in the multifamily rental market;
    • Equal secondary market access and pricing for all lenders, regardless of size or volume; and
    • The sustainable transfer of appropriate credit risk to the private sector. 
  • The letter also advocates that principles governing any potential administrative reforms to the GSEs should be guided by the potential impact on borrowers, taxpayers, and market structure dynamics.  Any reform that would meaningfully alter the GSEs' market presence-single-family, multifamily, or both-should also seek to maintain and enhance the stability and liquidity of the housing finance system.  (GSE Reform Coalition letter, March 1) 
  • Roundtable President and CEO Jeffrey DeBoer added, "Housing finance reform should support the GSE's overall mission-ensure Americans across a broad range of income levels have access to a diverse supply of housing." 

Senate Banking Committee Chairman Mike Crapo (R-ID) on Feb. 1 released an outline for reforming the nation's housing finance system, including the GSEs. (Crapo Statement and Housing Reform Outline, Feb. 1 / Roundtable Weekly, Feb. 8)