Calabria, currently the chief economist for Vice President Mike Pence – he previously worked for the National Association of Realtors and the National Association of Home Builders (NAHB) in the past – would be tasked with overseeing the two government-sponsored entities that he has long proposed reforming.
“[Calabria’s] extensive experience with housing finance issues provides an outstanding background for this opportunity,” NAHB Chairman Randy Noel said, in a statement. “We look forward to working with him to ensure the nation’s housing finance system retains the appropriate degree of federal support to provide consistent affordable mortgage credit for home buyers and liquidity and stability for homeownership and rental housing.”
While he was the director of financial regulation studies at the Cato Institute, a libertarian-leaning think tank, Calabria argued in favor of making it more difficult for low-income Americans to get a mortgage through the entities by increasing underwriting standards – requiring a minimum down payment of 5 percent and a minimum credit scores of 700.
He also argued in favor of breaking up Fannie Mae and Freddie Mac into smaller entities and that the entities should require more mortgage insurance.
The appointment of Calabria comes at a time when the White House has publicly floated the idea of privatizing both Fannie Mae and Freddie Mac.
Both of the mortgage-backed securities giants were taken under conservatorship in 2008 – at the same time FHFA was created – as a result of the 2008 financial crisis. They were bailed out by taxpayers to the tune of $187.5 billion, but have since paid that back and become profitable once again. Calabria argued in 2012 that the money would have been better spent elsewhere.
Calabria has also argued, like the White House’s proposal, that the charters under which Freddie Mae and Fannie Mac operate should be open to private companies. The two companies currently purchase mortgages directly from lenders, repackage them into mortgage-backed securities, and re-sell them into investors, adding a guarantee that they will pay the investor even if the homeowner defaults.
“If we learned anything from the rampant corruption that characterized early 1800s U.S. state banking, it is that legislators shouldn’t give out exclusive charters,” Calabria wrote, for The Cato Institute. “Accordingly, the government should delegate chartering authority to the regulator and allow anyone who can meet the requirements to get a charter.”
Lou Barnes, a Colorado mortgage banker and regular Inman contributor told Inman in June, that privatizing Fannie Mae and Freddie would immediately cause interest rates to jump by one percent and curtail availability.
Prior to joining Pence’s staff, Calabria served as the senior aide on the Senate Banking Committee where he was one of the lead drafters of the Housing and Economic Recovery Act of 2008, the legislation that created FHFA.
Calabria’s nomination requires Senate approval and if approved, he would serve a five-year term. His appointment has already been met with some skepticism by Senate Democrats.
I have serious concerns about the expected nomination of VP Pence’s economist, Mark Calabria, to be FHFA Director. I’ll have plenty of questions on his past statements calling in to question his commitment to affordable mortgages and even the 30 year fixed-rate mortgage. https://t.co/FnJOf7BGPW
— Mark Warner (@MarkWarner) December 11, 2018
The National Association of Realtors did not respond to a request for comment on the appointment, or to confirm Calabria’s role within the association.