The housing finance reform plan outlined today by President Obama to wind down Fannie Mae and Freddie Mac includes principles that “closely mirror” an outline the National Association of Realtors presented to the White House in 2011, NAR says.
NAR remains convinced of the need to preserve the government guarantee in any restructured secondary mortgage market “to ensure the continued availability of safe, reliable mortgages such as 30-and 15-year fixed-rate loans,” NAR President Gary Thomas said in a statement. “In a fully privatized market, many middle class Americans and individuals on fixed incomes would be unable to access affordable credit or be forced into adjustable-rate mortgages pinned to interest rate variations after a limited term.”
NAR is also backing Senate legislation that preserves the Federal Housing Administration’s single- and multifamily mortgage insurance programs, which more than 40 percent of first-time buyers relied on in 2012, while giving FHA more flexibility to manage the programs with increased oversight and enforcement powers.
Sheila Crowley, president and CEO of the National Low Income Housing Coalition, said the speech delivered by President Obama in Phoenix today “gave scant attention to the housing needs of the one-third of Americans who are renters.”
Crowley said there’s a shortage of 7.1 million units of affordable rental housing, and that “A balanced housing policy requires that the housing that someone rents is understood to be his or her home as much as the housing that someone buys.”
While the president laid out “common sense principles that should guide federal policy and the practices of the housing finance industry,” Crowley said a “truly comprehensive housing speech would have called on Congress to pass a HUD budget for the next fiscal year that preserves the existing low income housing programs we have and restores funding for the HUD programs that have been decimated by the budget cuts and sequestration.”
In his speech, President Obama applauded “a bipartisan group of senators working to end Fannie and Freddie as we know them,” referring to bipartisan legislation put forward in June. “And I support these kinds of reform efforts.”
Obama said housing finance reform efforts in the Senate are built around “four core principles” that he’s in agreement with:
- Private capital should take a bigger role in the mortgage market.
- Taxpayers should not be “on the hook for irresponsibility or bad decisions by some of these lenders or Fannie Mae or Freddie Mac.”
- The government should help preserve access “to safe and simple mortgage products like the 30-year, fixed-rate mortgage.”
- The government should help keep “housing affordable for first-time homebuyers … And that means we’ve got to strengthen the FHA so it gives today’s families the same kind of chance it gave my grandparents to buy a home, and it preserves those rungs on the ladder of opportunity.”
House Republicans who oppose the kind of backstop for securitizations of “plain vanilla” loans supported by the Obama administration have introduced their own plan for housing finance reform that envisions a much smaller role for the government.
Even if legislation overhauling the housing finance system is signed into law, it could take at least five years to phase down Fannie and Freddie, and “both could still be alive and kicking in 2021” and maybe beyond, Inman News columnist Ken Harney has written.