The transition of Fannie Mae and Freddie Mac out of conservatorship “should be deliberate, transparent, and supportive of the affordable housing market,” says a new report from the National Housing Conference (NHC).
The move out of conservatorship should also be done by “leveraging existing regulatory authorities where possible and engaging stakeholders across the housing ecosystem,” according to the report that was published after consultation with more than 100 policy experts and stakeholders.
“Ending the conservatorship of Fannie Mae and Freddie Mac is the last major piece of unfinished business from the financial crisis,” says NHC president and CEO David Dworkin. “After 16 years of limbo, the time has come to move beyond conservatorship with a transparent, thoughtful, and nonpartisan plan that addresses the remaining systemic flaws while preserving the vital mission of ensuring access to mortgage credit across the country.”
“Moving Forward: Administrative Recapitalization and Release From Conservatorship for Fannie Mae and Freddie Mac” comes out amid renewed talks about the future of the government-sponsored enterprises (GSEs).
The report notes that the GSEs are an important source of multifamily debt, helping maintain stability and liquidity in the market.
“It is imperative that no action be taken that reduces the enterprises’ participation in financing multifamily housing,” says the report. “Each enterprise should be free to pursue its own multifamily finance model to ensure diversity of funding, competition, and counter-cyclicality. However, FHFA [Federal Housing Finance Agency] should continue its regulatory oversight of the enterprises’ capital allocations through the multifamily scorecard to ensure that all market segments have access to multifamily financing and to ensure compliance with the Duty to Serve and Affordable Housing Goals regulations.”
NHC adds that it’s essential that “any windfall from the sale of the Treasury Department’s stake in the enterprises be substantially dedicated to affordable housing priorities.” A few examples are supplemental commitments to the Housing Trust Fund and Capital Magnet Funds, and funding to support the provisions in the Affordable Housing Credit Improvement Act and the Neighborhood Homes Investment Act. However, the report notes that redirecting proceeds from stock sales to recapitalization and affordable housing, rather than deficit reduction, cannot be done without amending the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.
The report further states that any movement out of conservatorship along with any subsequent reforms must guarantee the following aspects of the status quo:
- Maintain and enhance mortgage funding liquidity for single-family and multifamily mortgages, including a robust and efficient to-be-announced market;
- Ensure broad, reliable, safe and sound access to affordable mortgage credit for the most consumers possible as statutorily required in the Housing and Economic Recovery Act of 2008;
- Improve on the preconservatorship implicit guarantee structure;
- Maintain strong, independent regulation to ensure the GSEs are safe and sound while preserving a level playing field for lenders of all sizes; and
- Mitigate any adverse market and consumer impacts with a smooth, transparent transition.
The full report is available at www.nhc.org.
