Posted on Wednesday, March 16, 2011
On Friday, February 11, 2011, the Obama Administration released its plan for reforming America's Housing Finance Market. The proposal offers three options for handling the secondary mortgage market participants Fannie Mae and Freddie Mac:
• Full privatization,
• A guarantee mechanism during crisis, and
• Catastrophic re-insurance.
The plan also proposes criteria that would foster increased down payments to 10 percent, lower GSE and FHA loan limits, and raise the GSEs' guarantee fees (g-fees) and FHA premiums significantly, in an effort to level the playing field and bring back the private sector.
NAR welcomes the Obama Administration's call for an orderly transition from the current form of the secondary mortgage market to a new structure that would enable Americans to achieve affordable, sustainable mortgages. NAR recognizes that the existing system failed and that changes are needed to protect taxpayers from an open-ended bailout. However, NAR believes that the new system must involve some government presence, outside of FHA, USDA, and the Department of Veterans Affairs, to provide middle-class families access to affordable mortgages at all times and in all markets.
NAR recommends the following key points for reforming the GSEs:
• Reforms should ensure a strong, efficient financing environment for homeownership and rental housing.
• The government must clearly, and explicitly, guarantee the issuances of the entities.
• The reformed entities should guarantee or insure a wide range of safe, reliable mortgage products.
• Sound and sensible underwriting standards must be established.
• The entities should price loan products or guarantees based on risk.
• The reformed entities must have a separate legal identity from the federal government but serve a public purpose.
• The GSEs should remain politically independent.
• To increase the use of covered bonds, particularly in the commercial real estate arena, the entities should pilot their use in multifamily housing lending.
• There must be strong oversight of the entities.
As the Administration and Congress begin discussions about reforming the housing finance market, it is important that America's home buyers and sellers, as well as the housing industry, are well represented and accounted for in this conversation. To help demonstrate to policymakers and regulators the importance of homeownership, NAR's Leadership Team will kick off a three-city bus tour beginning in March to promote the benefits of home ownership. Each stop on the tour, part of the "Home Ownership Matters" campaign which was launched in late 2010, will include two events designed to engage REALTORS® and consumers on key issues. The awareness this effort will raise will benefit REALTORS® and home owners nationwide.
NATIONAL ASSOCIATION OF REALTORS