WASHINGTON – May 15, 2013 – While proposed regulatory changes confuse the smartest minds, experts at the National Association of Realtors® (NAR) convention say upcoming decisions could help – or harm – homebuyers.
Industry insiders offered their outlook at the “Regulatory Issues Forum – Will Federal Regulators Shape the Future of Mortgage Finance?” session during the Realtors® Midyear Legislative Meetings & Trade Expo.
Jason Gold, senior fellow at Progressive Policy Institute, said that new and pending mortgage rules stemming from the Dodd-Frank Wall Street Reform and Consumer Protection Act is one of the top challenges. Another one: Uncertainty surrounding reform of the government-sponsored enterprises Fannie Mae and Freddie Mac.
Barbara Novick, vice chairman at BlackRock Inc., said more must be done to restore the health of the U.S. housing market and attract greater private capital into mortgage markets.
“There isn’t enough private capital available to fund the housing market, so there needs to be a continued and clearly defined role for federal government participation; having no government presence in the market is not a very good idea,” Novick said.
Novick presented several principles she thinks should guide future housing finance reform, including a clearly defined government role and a system that treats all market participants fairly. She said transparency at all levels – from loan origination to securitization – is critical to ensure a more effective future housing finance system.
She says the housing finance system must also reaffirm the rights of first lien holders, address eminent domain and other anti-investor proposals, protect investor rights in servicer settlements, and provide investors with clarity and certainty.
Rob Couch, counsel at Bradley Arant Boult Cummings, said that last year Fannie, Freddie, and the federally owned Ginnie Mae issued more than 99 percent of all mortgage-backed securities, up heavily from about 44 percent in 2006.
“Something has to change, that amount of risk is far too great for the federal government to continue to assume,” he said.
Couch is also a member of the Bipartisan Policy Center Housing Commission, which recently released recommendations for a new housing finance system. He overviewed proposals to scale back the government’s role in the nation’s housing finance system –attracting more private capital and winding down Fannie Mae and Freddie Mac by replacing them with a new self-supporting government entity that provides a limited government guarantee for catastrophic risk.
Couch said the commission hopes to jump start more serious discussions over the future of the nation’s mortgage market, and he anticipates legislative action later this year.
He added it’s important to get the new finance system right. “Owning a home remains the most effective way to build middle class wealth; the nation needs policies that are favorable to homeowners and homeownership,” Couch said.
Adolfo Marzol, vice chairman at Essent Guaranty Inc., said the future look of the secondary mortgage market is important, but so is the mechanism to transition from today’s model to any future goal. A poorly functioning mortgage market could cobble the mortgage and real estate industry and block creditworthy buyers from ownership.
NAR has created a set of principles designed to keep the secondary mortgage market flowing smoothly. It’s available on their website.
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