The future of housing finance in the U.S. will be a key issue facing the winner of the upcoming presidential election. That’s what a panel of industry experts told several thousand Realtors® gathered at a symposium, Housing Policy in 2013: Challenges, Opportunities and Solutions, during the REALTORS® Midyear Legislative Meetings & Trade Expo this week.
The National Association of Realtors® supports a comprehensive reform strategy for the secondary mortgage market to help maintain a level of certainty in the marketplace and not further disrupt the still fragile housing market recovery.
“As leading advocates for homeownership, Realtors® want to make sure that everyone who wants to own a home and is able to afford one can do so,” says NAR President Moe Veissi. “Without a secondary market, mortgage interest rates would be unnecessarily higher and unaffordable for many Americans, and products like the 30-year fixed-rate mortgage would likely be inaccessible for most borrowers.”
During the symposium, Federal Housing Finance Agency Acting Director Ed DeMarco noted progress made toward recovery, but cautioned that more remains to be done.
“We all are cautiously optimistic that the signs of stabilization, and in some places, strength, that have begun to emerge in various housing markets are true signals that a long-awaited recovery is taking place,” said DeMarco. “While FHFA will keep its focus on foreclosure alternatives, refinancing, and ongoing liquidity in the marketplace, it is time for policymakers to begin work in earnest on the future housing finance system.”
DeMarco outlined several public policy goals to ensure a more effective and efficient housing finance system, including building a new infrastructure for the secondary mortgage market; establishing standards that promote a safer and more efficient housing finance system; and increasing private capital while retracting government participation in the secondary mortgage market. FHFA assumed conservatorship of the government-sponsored enterprises Fannie Mae and Freddie Mac in 2008, and DeMarco said the entities have played a critical role in ensuring access to mortgage capital following the market downturn when private lenders left the market. Since 2008 the GSEs have bought or guaranteed approximately 75 percent of mortgages originated in the country.
DeMarco noted that FHFA has completed more than 1 million loan modifications since 2008 and helped millions more families avoid foreclosure through a short sale, deed-in-lieu or other alternative. He said changes to the agency’s refinancing program has created more opportunities for homeowners who current but underwater on their mortgages to take advantage of low interest rates and refinance into more affordable terms.
Also speaking at the symposium was Federal Housing Administration Commissioner and Assistant Secretary for Housing Carol Galante. “Future generations deserve the same home buying opportunities as past generations,” said Galante.
Toward that end, Galante noted that FHA helped ensure access to safe, affordable financing in the absence of private market involvement following the economic downturn. She said the agency is working to preserve its mission of providing liquidity while ensuring its continued viability, and has increased premiums to compensate for losses that resulted from increased foreclosures. Galante said the long-term financial health of the agency looks good and that loans originated in recent years are performing well.
Following Galante’s speech, a panel of industry experts debated the future of the GSEs and the government’s role in promoting the American dream of homeownership.
Moody’s Analytics Mark Zandi identified an uncertain regulatory environment as a key issue facing the industry. After rules like the Qualified Mortgage (QM) and the Qualified Residential Mortgage (QRM) are defined, private participation in the market might increase. Zandi warned however, that without a government backstop there would be no 30-year fixed-rate mortgage, which most consumers currently use to finance home purchases.
Wharton School of Business Professor Susan Watcher agreed that there is tremendous uncertainty in the market about the future of housing finance and suggested that policymakers lack a clear vision. She said that without the right system in place, the country could face a similar market downturn in the future.
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