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Statement on Hensarling mortgage finance reform proposal

The National Housing Conference rejects the narrow, partisan House proposal on mortgage finance

FOR IMMEDIATE RELEASE—July 16, 2013                                       

Contact:
Blake Warenik
202.466.2121 (ext. 240)
bwarenik@nhc.org           

WASHINGTON—On July 11, Rep. Jeb Hensarling (R-Texas), Chairman of the House Financial Services Committee, released a mortgage finance proposal that stands in sharp contrast to the bipartisan Corker-Warner proposal introduced last month in the Senate. This bill takes a much more partisan approach by focusing on private-label mortgage-backed securities while eliminating or ignoring critical pieces of housing finance that are essential to American families' access to affordable mortgages and rental housing.  The National Housing Conference supports a bipartisan approach to mortgage finance reform and opposes many of the provisions of the House bill, as well as the rhetoric surrounding it.

“The proposal from the Financial Services Committee takes housing in the wrong direction,” said Chris Estes, NHC’s president and CEO. “It moves away from a system that offers safe and sound loans accessible to all responsible borrowers, away from financing for affordable rental housing, and away from the capital needed in so many parts of America still struggling to recover.”

The bill proposes to dismantle Fannie Mae and Freddie Mac and curtail FHA's role in hopes that private-label securities will fill in the rest of the secondary market. It would not provide an explicit government backstop, thereby leaving the country in a situation similar to the pre-financial crisis world, in which there was no explicit guarantee of mortgage markets, but the federal government was expected to step in if the system crashed. Without an explicit government backstop, however, there would be little room for the safe, sustainable, 30-year fixed-rate mortgage that provides stable housing and a way for American families to build wealth. 

While the bill’s overall effect on housing markets and American households would be dire, some of its provisions could be positive. Transparency and standardization would do much to make private-label mortgage-backed securities more efficient. Regulatory provisions, like the risk-retention rule, could be modified to let credit flow more freely to responsible borrowers without perfect credit or accumulated wealth.

Ethan Handelman, NHC’s vice president for policy and advocacy, said the rhetoric surrounding the bill is in some ways worse than the policy provisions. Arguments in the bill’s favor rely on a simplistic, ideologically-driven view of the world that misses how unregulated private capital pumped up the housing market and then fled during the crash, leaving government-backed sources as the only option for families in need of mortgage credit.

“Ascribing the housing crash entirely to government is simply false. Perpetuating that idea will lead policy astray,” said Handelman.

NHC urges members of Congress to undertake the political compromises necessary to create a viable housing finance reform bill. Only a truly bipartisan effort has a chance to enact meaningful reform that would bring private capital back, protect taxpayers, and ensure reliable flows of capital for affordable homeownership and rental housing for all in America. NHC will continue to work with housing community stakeholders to provide guidance and advice on both principles and technical details that will ensure a successful housing finance reform effort.

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About the National Housing Conference

The National Housing Conference (NHC) represents a diverse membership of housing stakeholders including tenant advocates, mortgage bankers, non-profit and for-profit home builders, property managers, policy practitioners, realtors, equity investors, and more, all of whom share a commitment to a balanced national housing policy. Since 1931, NHC has been dedicated to ensuring safe, decent and affordable housing for all in America.  We are a nonpartisan, 501(c)3 nonprofit that brings together our broad-based membership advocate on housing issues.