The National Association of Home Builders (NAHB) told Congress that it will work with lawmakers to make changes to the Protecting American Taxpayers and Homeowners (PATH) Act legislative proposal to ensure that it provides the federal support necessary to maintain a strong and liquid housing finance system. Testifying before the House Financial Services Committee, NAHB CEO Jerry Howard urged the committee to modify the PATH Act to make sure that the federal government continues to provide a backstop for a reliable and adequate flow of affordable housing credit in all economic and financial conditions.
"NAHB believes federal support is particularly important to ensure that 30-year fixed-rate mortgages, the bedrock of the nation's housing finance system since the 1930s, remain available at reasonable interest rates and terms," said Howard. "As currently drafted, the PATH Act does not provide the federal support necessary to ensure a strong and liquid housing finance system, and we urge the committee to make the necessary changes."
There are some positive elements in the PATH Act, and NAHB agrees that private capital must be the dominant source of mortgage credit, Howard said. However, ensuring the safety and stability of the housing finance system cannot be left entirely to the private sector.
"The historical record clearly shows that the private sector is not capable of providing a consistent and adequate supply of housing credit without a federal backstop," Howard said.
NAHB has recommended to the committee that Fannie Mae and Freddie Mac be gradually phased into a private sector-oriented system, where the federal government's role is explicit but its exposure is limited. Federal support would be limited to catastrophic situations where carefully calibrated levels of private capital and insurance reserves would be depleted before any public funds were employed to shore up the mortgage market.
NAHB also urged House lawmakers to modify the sections of the bill outlining changes to the Federal Housing Administration (FHA).
"The PATH Act would drastically diminish FHA's vital liquidity mission," said Howard. "By simultaneously leaving all federal support for housing to FHA, and then by greatly reducing the overall scope and reach of FHA's programs, the PATH Act would greatly limit homeownership and rental housing opportunities for many financially responsible and qualified Americans."
Because there is currently a great deal of uncertainty among consumers and home builders due to the unresolved debate on reforming the housing finance system and the government-sponsored enterprises (GSEs), Howard urged the Committee to move forward in a careful, prudent manner to provide needed assurance for the industry and consumers.
"At a time when housing is just starting to get back on its feet and provide job and economic growth, we don't want to do anything that would reverse this positive momentum," Howard said. "It's definitely important that Congress be mindful of housing's important role in the economy going forward. NAHB looks forward to working with lawmakers to create a sustainable housing finance system that will ensure stability and liquidity in the financial system that supports homeownership and rental housing."