The debate around reform of the government-sponsored enterprises (GSEs) is reigniting as congressional and administrative agendas converge with new leadership. The task, which has eluded administrations for more than a decade, may finally have a chance of getting over the finish line.
In a recent interview on FOX Business, Tim Rood, Chairman of The Collingwood Group, squared off with journalist Charlie Gasparino, who expressed concern that the wrong approach to GSE reform could result in a repeat of 2008. Rood argued that the GSEs exist to benefit the taxpayers and the American housing market. “Clearly one of the big problems was this dual purpose nature – private companies with a public mission – and that needs to remedied,” Rood said.
Several factors suggest the time is ripe to restart this debate. Acting Director of the Federal Housing Finance Agency (FHFA) and Comptroller of the Currency Joseph Otting has signaled that the White House may be preparing a new proposal. This aligns with the Senate confirmation of President Trump’s permanent pick for FHFA head, Mark Calabria, currently serving as Chief Economist to Vice President Pence.
Congress appears to be moving forward with its own attempts at GSE reform as well. In February, Senate Banking Committee Chairman Mike Crapo (R-ID) released a legislative proposal, seeking to re-establish Congress’s role in the discussion.
Crapo’s proposal would convert Fannie Mae and Freddie Mac to private guarantors and allow for competition from other private guarantors. The Trump administration’s proposal has not yet been defined, but representatives have expressed a strong interest in ending their conservatorship. Most parties agree, however, that any solution should minimize taxpayer risk while protecting mortgage credit.
In a statement, Crapo said, “My priorities are to establish stronger levels of taxpayer protection, preserve the 30-year fixed rate mortgage, increase competition among mortgage guarantors, and promote access to affordable housing.”
Along those lines, White House spokesperson Lindsay Walters said in a statement, “The White House expects to announce a framework for the development of a policy for comprehensive housing finance reform shortly. At this time, no decisions have been made on any reform plan. As part of the process, however, the administration will work with Congress to formulate a plan that fully addresses the risks to taxpayers presented by the current housing finance system and that improves the ability of creditworthy Americans to buy a home.”
As stakeholders go back-and-forth on the appropriate vision for the future of Fannie Mae and Freddie Mac, Rood reminds us, “they exist to make sure there is mortgage credit in every market on every day.”
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