Reforms Will Shrink the Government’s Footprint in Housing Finance on a Responsible Timeline, Help Protect Taxpayers
Plan Includes Critical Measures to Help Fix the Fundamental Flaws in the Mortgage Market, Better Target Government’s Support for Affordable Housing
WASHINGTON – Today, the Obama Administration delivered a report to Congress that provides a path forward for reforming America’s housing finance market. The Administration’s plan will wind down Fannie Mae and Freddie Mac and shrink the government's current footprint in housing finance on a responsible timeline. The plan also lays out reforms to continue fixing the fundamental flaws in the mortgage market through stronger consumer protection, increased transparency for investors, improved underwriting standards, and other critical measures. Additionally, it will help provide targeted and transparent support to creditworthy but underserved families that want to own their own home, as well as affordable rental options.
“This is a plan for fundamental reform – to wind down the GSEs, strengthen consumer protection, and preserve access to affordable housing for people who need it,” said Treasury Secretary Tim Geithner. “We are going to start the process of reform now, but we are going to do it responsibly and carefully so that we support the recovery and the process of repair of the housing market.”
“This report provides a strong plan to fix the fundamental flaws in the mortgage market and better target the government’s support for affordable homeownership and rental housing,” said Housing and Urban Development Secretary Shaun Donovan. “We must continue to take the necessary steps to ensure that Americans have access to quality housing they can afford. This involves rebalancing our housing priorities to support a range of affordable options, from promoting much-needed financing for quality, affordable rental homes to ensuring the availability of safe, and sustainable mortgage products for current and future homeowners.”
The Obama Administration's reform plan will:
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MORTGAGE NEWS: Housing Finance Reform: Reduced Loan Limits, Larger Down Payments, Higher FHA MIP Fees
by Adam Quinones
The long-awaited report on the future of housing finance has been released by the Obama Administration.
Below is the presser....
I highlighted some talking points. The first thing to take away from this paper is the Administration's intention to wind down Fannie and Freddie on a responsible timeline. That tells you this reform/winding down process will take many years and much debate. 5 to 7 years according to Treasury Secretary Tim Geithner. There's nothing wrong with that though. Slow and steady works as long as lenders have funding liquidity in the process. The main goal is to get housing finance reform done right....the first time, this market can only take so much more stress, rewriting regs repeatedly would be detrimental to the overall housing recovery process.
Next on the list of observations is a tightrope transition from government supported loan funding to private investor supported loan funding. It appears the Administration is taking an "if we don't do it, someone else will" approach. They will attempt to accomplish their objective of reducing the government's "footprint" in the secondary mortgage market by tightening underwriting guidelines and raising fees. They believe this will effectively "level the playing" field and lower the barriers to entry for private investors. We hope risk retention (skin in the game) regs don't "unlevel" that playing field. READ MORE: Proposed Risk Retention Reform Affects Banker and Broker Loan Pricing
There is a ton of discussion still to be had. For now, read on...
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