NAR hosts industry-wide forum on Fannie, Freddie reform

NAR hosts industry-wide forum on Fannie, Freddie reform

WASHINGTON – Feb. 8, 2019 – Over 400 people were on hand for the National Association of Realtors®‘ (NAR) Housing Finance Reform Policy Forum this week, where NAR unveiled a new vision for reforming the government-sponsored enterprises (GSEs – notably Fannie Mae and Freddie Mac).

NAR’s panel discussion, called “NAR’s vision: A plan for secondary finance shaped in the aftermath of adversity for longevity,” was led by co-authors Dr. Susan Wachter, Professor of Real Estate and Finance at the University of Pennsylvania, and Dr. Richard Cooperstein, head of Risk Management at Andrew Davison and Company. Wachter and Cooperstein presented NAR’s comprehensive GSE proposal publicly for the first time at the Grand Hyatt in Washington, D.C.

According to NAR’s media statement on the forum, the association’s goal is to “provide a pragmatic solution to the challenges facing the housing finance system by prioritizing and protecting a liquid mortgage market for middle America and underserved borrowers alike.”

Fannie Mae and Freddie Mac enjoyed limited government protections before the Great Recession, but the federal government took control of the GSEs during a bailout. While taxpayers currently reap benefits from that government ownership – excess profits from buying loans from banks currently goes into government coffers – it presents great risk to American taxpayers should another recession hit.

Moving the GSEs from public to private operations, however, may change the dynamics for home lending since lenders must follow GSE rules if they hope to fund mortgages to homebuyers and later sell them to Fannie Mae or Freddie Mac. In private hands, things like the 30-year fixed-rate mortgage could disappear if private firms deem them too risky.

According to NAR, it’s just-released vision offers policymakers a responsible framework that protects taxpayers, minimizes costs to consumers and promotes housing accessibility and affordability.

NAR’s vision for housing finance reform

An executive summary and full copy of NAR’s vision on housing finance reform can be found on

“This vision is the result of years of research and collaboration between NAR, our members, our friends in the industry and countless policymakers who have been influential in this arena,” said NAR President John Smaby. “Our hope is that this research will help provide Congressional leaders and administration officials with a credible, deliberate framework as they work to secure reforms that will benefit taxpayers, consumers and the American economy.”

Smaby emphasized that continued “liquidity and stability in the mortgage market remains NAR’s priority during these discussions.”

Thanks in part to the Great Recession, the GSEs today differ from the GSEs of 2005. Fannie Mae and Freddie Mac have a stronger regulator in the Federal Housing Finance Agency (FHFA) and subject to additional Congressional oversight. They’re restricted in the products they can purchase, the size of their retained portfolios and their ability to lobby.

In addition, they increased, and will continue to expand, the volume of mortgage credit risk shared with the private sector. These changes have begun to decrease risks tied to the GSEs, injecting private capital and market disciplines to guarantee pricing and mortgage rates for consumers.

NAR says its research builds on a structure designed to maximize private investment, identifying where competition works and where it does not

“This vision of a reformed secondary market for housing finance first recognizes the need for the GSEs to carry out a public mission – the same need that led to their initial creation,” the paper reads. “Second, this proposal builds upon the transformed enterprises under conservatorship, bringing in appropriate levels of private capital and a strong regulator to protect taxpayers. Third, this proposal codifies a structure that is effective, resilient and fair, balancing the tension of private operating companies with the public mission. It builds on what works today and creates a system that will serve the nation for decades to come.”

“By addressing the imperfections in the market for housing finance, we can increase competition of private capital to invest in mortgages, keep markets more stable in times of stress and stay mission-focused,” Cooperstein said during the panel discussion.

“GSE reform is the critical, unfinished business of the Great Recession,” added Wachter. “We believe the shareholder-owned regulated utility we propose will protect taxpayers and ensure the fulfillment of the mission to serve the nation for the future.”

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