Momentum Builds for Housing Finance Reform Plan With Proper Federal Support

Filed in Capitol Hill, Housing Finance by on April 15, 2019 0 Comments
Mark Calabria

Mark Calabria is sworn in as the new director of the Federal Housing Finance Agency.

NAHB continues to play a pivotal role in the housing finance reform debate, as CEO Jerry Howard attended today’s swearing-in ceremony of Mark Calabria as the new director of the Federal Housing Finance Agency.

Calabria, whose agency oversees Fannie Mae and Freddie Mac, echoed other key policy leaders in citing the important need to move forward on housing finance reform. He was quoted by Politico as saying that President Trump’s recent memorandum on this issue “lays out a constructive path towards mortgage finance reform.”

Calabria’s comments come just three weeks after Senate Banking Committee Chairman Mike Crapo (D-Idaho) held a congressional hearing on his own proposal to move the debate forward. NAHB Chairman Greg Ugalde testified at the March 26 Senate hearing, stating that “we [NAHB] appreciate the chairman’s continued support for an explicit government backstop for a key portion of the conventional mortgage market.”

Following release of the March 27 presidential memorandum, Ugalde said: “NAHB is especially pleased that his memorandum specifically cites the importance of preserving the 30-year, fixed-rate mortgage, which has enabled millions of American families to build wealth and financial security through homeownership.”

Opposing this general line of thinking, Peter Wallison and Edward Pinto published an editorial in the April 4 edition of the Wall Street Journal calling for a complete privatization of the nation’s mortgage markets. They argued failure to do so would lead to a future government bailout.

Responding forcefully to this flawed assertion, Ugalde sent a letter to the editor to the Journal that was published today. The letter clearly shows why a proper level of federal support is needed for the nation’s mortgage markets, and asserts: “Privatization won’t prevent a taxpayer bailout. It virtually assures that a bailout will eventually be necessary.”

NAHB will continue to work with the Trump administration and Congress to advance bipartisan housing finance legislation that will reform the current system and provide certainty to the marketplace while maintaining the proper level of government support for housing in all economic and financial market conditions.

(Editor’s note: For readers who do not have a Wall Street Journal subscription, Ugalde’s full letter can be viewed below.)

Housing Finance Reform: First Do No Harm

In light of the urgent need to reform the nation’s housing finance system, it is deeply troubling to see Peter J. Wallison and Edward J. Pinto reflexively rehash worn-out scare tactics of an impending $7 trillion taxpayer bailout and housing bust if any plan is approved that falls short of complete privatization (“The Coming Trump Housing Crisis,” op-ed, April 5).

The pair unjustly turn their ire on President Trump’s recent Memorandum on Federal Housing Finance Reform because it acknowledges the need for an appropriate federal role and seeks to ensure that the 30-year, fixed-rate mortgage remains readily available and affordable for working American families.

The Trump plan represents a positive step forward, but Messrs. Wallison and Pinto would have us believe that it is simple to privatize the mortgage market and get taxpayers off the hook for possible future bailouts without disrupting the nation’s housing finance system. History shows that when times get tough, private mortgage credit has fled the market, leaving government-supported mortgage loans as the primary or only option for qualified buyers. Privatization won’t prevent a taxpayer bailout. It virtually assures that a bailout will eventually be necessary.

Clearly, the status quo is unacceptable. Uncertainty about the future of Fannie Mae and Freddie Mac, now in their 11th year of conservatorship, is hindering investment, slowing the housing market and increasing downside risks to the broader economy.

President Trump and Sen. Mike Crapo have offered thoughtful proposals to implement needed reforms. Enabling more qualified borrowers to have access to affordable home loans while also boosting affordable rental opportunities for those who choose or need to rent will build a healthy housing market, which is a cornerstone of a strong U.S. economy.

Greg Ugalde
Chairman, National Association of Home Builders
Washington

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