Housing Finance System Reform Vital For Housing And Economy, Builders Tell Congress

March 6, 2008 – To help bolster a faltering housing market, the National Association of Home Builders (NAHB) today called on Congress to move quickly to enact comprehensive regulatory reform for housing government sponsored enterprises (GSEs) Fannie Mae, Freddie Mac, and the Federal Home Loan Banks that will ensure their financial safety and soundness and allow them to vigorously pursue their housing mission.
 
“At a time when the housing market needs them more than ever, Fannie Mae and Freddie Mac have failed to adequately respond to the mortgage crisis,” Jerry Howard, executive vice president and CEO of NAHB, told members of the Senate Banking Committee. “Rather than aggressively pursue market solutions, they are hunkering down to shore up financial results and shareholder returns – and are even taking steps that will further burden struggling mortgage borrowers.”
 
Because their regulator, the Office of Federal Housing Enterprise Oversight (OFHEO), continues to impose a 30 percent capital surcharge on both companies, Fannie and Freddie are attempting to build their capital reserves by imposing higher fees that will raise mortgage borrowing costs at the worst possible time, Howard said.
 
“OFHEO is constraining the ability of Fannie and Freddie to do all they can to promote affordable housing and to help strapped borrowers. At the same time, HUD’s mission oversight over the two GSEs is lacking. HUD should be requiring them to do more, not less, in the present dire mortgage market circumstances,” said Howard. “This just underscores why major reform of this flawed, bifurcated regulatory framework is long overdue and urgently needed.”
 
NAHB believes that H.R. 1427, the Federal Housing Finance Reform Act of 2007, which passed the House last May, makes significant progress in allowing the GSEs to operate in a safe and sound manner while preserving the vitality of their government-sponsored status for the fulfillment of their vital housing mission.
 
In crafting a Senate bill to strengthen the regulatory framework of the GSEs, Howard urged lawmakers to:
 
– Balance the GSEs’ housing mission with safety and soundness concerns.
 
– Provide Fannie Mae and Freddie Mac the flexibility to respond promptly, within their charters, to meet market needs.
 
– Extend the increase of conforming loan limits in high-cost areas.
 
– Focus and enhance GSE benefits to expand affordable housing opportunities.
 
– Employ capital as a precise instrument of risk management
 
– Preserve GSE portfolios as tools for achieving liquidity and their affordable housing mission.
 
“With the U.S. housing market now in the contraction phase of the most pronounced housing cycle since the Great Depression, passage of a GSE regulatory reform bill has the ability to greatly relieve liquidity and inventory pressures in the nation’s mortgage markets, help stabilize housing prices and bolster consumer confidence. This would bring immediate benefit to the overall economy,” said Howard.