The President and Congress should make housing finance reform that winds down Fannie and Freddie a priority this Congress, said the Financial Services Roundtable (FSR) following President Obama’s speech today on housing, including an announcement that the Federal Housing Administration (FHA) will lower its annual mortgage insurance premiums.
“We are pleased that the President has reaffirmed the administration’s commitment to permanent housing finance reform, and we hope he will take this opportunity to renew efforts to create a new system replacing Fannie Mae and Freddie Mac,” said FSR’s Housing Policy Council President John Dalton. “The mortgage industry is working hard to respond to the needs of consumers for well-underwritten, affordable mortgages, but a new, stable secondary mortgage market based on private capital is needed to protect taxpayers from future market trouble.”
FSR urges the White House, FHA and the Federal Housing Finance Authority (FHFA) to coordinate housing policy standards. For example, private mortgage insurers must meet new stronger capital requirements to do business with the GSEs, but the FHA is moving in the opposite direction by reducing insurance premiums for its loans. Regulators should also continue to work with lenders on establishing clear representations and warranties for the GSEs and repurchase requirements for FHA to give lenders the confidence to make good loans to qualified buyers.
FSR and HPC continue to advocate for housing finance reform legislation that will wind down Fannie and Freddie and replace them with a new market backed by private capital and a last-resort government backstop. This new system will relieve taxpayers from being at significant financial and economic risk should the economy face another downturn. The GSEs currently hold the majority of American mortgages and expose taxpayers to financial risk.
