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National industry appointments update - 08/07/2006

Aug 07, 2006

Senate reviews role of GSEs in mortgage marketmortgagepress.comGSEs, regulation, affordable housing On Feb. 10, the Senate Committee on Banking, Housing and Urban Affairs held a hearing on the role of government-sponsored enterprises (GSEs) in the mortgage market. Testimony was provided by the Honorable John C. Weicher, assistant secretary for Housing-Federal Housing Administration commissioner of the U.S. Department of Housing and Urban Development; a number of experts from various universities; and the Consumer Federation of America. Committee Chair Richard Shelby launched the hearing by exhorting the strengthening of the regulation of GSEs. Ranking Member Paul Sarbanes, however, emphasized that when examining the regulation of GSEs, the "housing mission" of Fannie Mae and Freddie Mac must not be undermined. Sen. Elizabeth Dole promoted her recent legislation, S190, which addresses the issue of GSE regulation. She claimed that Fannie and Freddie have fallen short of their mission of providing more affordable housing and then echoed President Bush's State of the Union address by extolling the values of the American "ownership society." The rest of the committee focused on one of two concepts: the "housing mission" of the GSEs with respect to low- and moderate-income families, and the emphasis on ensuring the "safety and soundness" of the GSEs. John Weicher testified that HUD's most recent final rule regarding affordable housing reflects the administration's belief that the GSEs can and should do more to promote access to mortgage credit for those traditionally underserved by the mortgage markets. HUD contends that this belief is fully consistent with Congress' historical support for affordable housing and homeownership opportunities, as well as HUD's long-standing commitment to furthering these objectives. HUD's final rule implemented three main changes to the housing goals: •Goal levels are significantly higher than HUD's goals for 2001-2004; •The final goal levels rise in nearly equal stages from year to year. This staging will allow the GSEs time to adjust their business models to meet the required levels; and •The final rule establishes home purchase sub-goals under each housing goal. Currently, GSEs lag behind the market in responding to affordable housing needs, which directly conflicts with their mission. By 2008, the new affordable housing goals will require that the GSEs at least "meet the market," meaning that the GSEs' purchases of mortgages in each goal category will be proportional to the share of all mortgages in the conventional conforming market that fall within that category. Mr. Weicher also expressed that the new goals and sub-goals will particularly benefit first-time homebuyers as well as fill in the "gaps in homeownership" that exist in minority and low-income populations. Other experts testified regarding the importance of the public mission of the GSEs, how they promote affordable housing, and that the benefits of GSEs outweigh the costs. The experts all agreed that some reforms of the GSEs are necessary, but insisted that the benefit the GSEs and secondary markets provide the American consumer is a major contributory factor to the strength of America's economy today and to the long-run stability of America's economy going forward.
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