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Tuesday, October 2, 2012 - 16:30

US Housing Policy Experts Say GSE Reform Will Have To Wait

WASHINGTON (MNI) - Housing policy experts Tuesday said reforming Fannie Mae and Freddie Mac will likely be delayed in the near term as lawmakers focus on the fiscal situation and that ultimately it will be the Federal Housing Finance Agency, the mortgage giants' regulator, who will bring the issue of GSE reform to the forefront.

Christopher Mayer, a professor at Columbia University said during a panel discussion on housing at the National Press Club, "my suspicion is that housing is not going to be a part of that debate."

"It is all going to be about the budget crisis and the fiscal cliff," Mayer said of Congress' focus.

Gary Thomas, president-elect of the National Association of Realtors who was also on the panel, pointed out that no real progress on GSE reform can be made until the Consumer Financial Protection Bureau and the Federal Reserve develop a rule for Qualified Mortgages and Qualified Residential Mortgages which will determine underwriting and risk retention standards.

Susan Wachter, a professor at the University of Pennsylvania, said "there will be discussions, I don't think we will have a vote" on GSE reform.

The panel -- which also included Douglas Holtz-Eakin, president of the American Action Forum a-- greed that there still needs to be a lot of "consensus building behind the scenes" before a real reform proposal can be made.

Wachter said she believes it will be end up being the FHFA that will be the "catalyst" that forces the GSE reform as it moves forward with its mandate to dismantle Fannie and Freddie in their current state and reduce their presence in the housing finance market.

The FHFA has already increased guarantee fees and laid out a strategy which includes slowly combining Fannie and Freddie into a single entity.

"It will be FHFA that will set up the rules and then there will need to be a response," Wachter said.

The FHFA's current chief is Acting Director Edward DeMarco, and it possible that after the November elections, either President Obama or his Republican challenger Mitt Romney could install a new director whose views on housing policy more closely align their own.

However, both President Obama and Mitt Romney have not made clear what their actual housing policy is.

Mayer said he thinks "it does matter" who is elected president because he believes Obama and Romney have very different policies and that "FHFA becomes the place that sets de facto policy without Congressional guidance."

Holtz-Eakin said in the end, "only the White House can make that step" of GSE reform but might not doing it willingly.

"Whoever is the next president,is going to do things because they have to, not because they want to," Holtz-Eakin.

Mayer said he believes rather than addressing housing reform right away, Congress will continue to kick the proverbial can down the road.

"I don't see what forces dealing with the GSEs," Mayer said, adding that Congress could even point to Fannie Mae and Freddie Mac as a revenue source during a time when the country has a massive deficit.

In the second quarter Fannie Mae reported a net income of $5.1 billion and Freddie Mac had a net income of $3.0 billion -- more than sufficient to make the interest payments owed to Treasury for bailing them out.

"There are too many things that Congress is going to have to deal with right away," Thomas said, before they address GSE reform.

** MNI Washington Bureau: 202-371-2121 **

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