Spring may not have arrived in Washington D.C. yet, but hope – however little – springs eternal once again at the prospect of GSE (Government-Sponsored Enterprise) reform. Recent communications from both the Administration and Congress have reawakened chatter and speculation regarding the possibility for a long overdue overhaul of Fannie Mae and Freddie Mac.
First, Acting FHFA (Federal Housing Finance Agency) Director Joseph Otting said in a speech delivered to FHFA staff in January that the Administration would soon release a plan to take Fannie and Freddie out of conservatorship and begin a process of administrative reform. This was news to many – including Congress. And it prompted calls for the Administration to share its plan with Congress. Amid the uproar, the White House released a statement walking back Otting’s comments, saying that the Administration expected to release a “framework for the development of a policy for comprehensive housing finance reform” soon. However, this statement made clear that no decisions have been made with regard to this plan, and that the Administration intends to work with Congress on GSE reform.
Then, Senate Banking Committee Chairman Mike Crapo released a “Housing Reform Outline” that set forth his principles for housing finance reform legislation. This plan would turn Fannie and Freddie into private guarantors for securities generated via a common securitization platform operated by Ginnie Mae. Additionally, this proposal would change the structure of FHFA so that rather than being led by a single director it would be overseen by a bipartisan board of directors. Finally, it would replace the current affordable housing goals and duty to serve requirements with a Market Access Fund, which would provide grants, loans, and credit enhancement to facilitate homeownership and affordable rental housing for undeserved communities.
So, we’re off to the races on housing finance reform, right? Well, maybe. While the fact that housing finance reform is being talked about once again after having largely lain dormant in Washington D.C. policy discussions for quite some time, the track record is not good for turning stated reform principles into actual reform. Despite an appetite for taking up the issue again, the same points of contention that have prevented action in the past remain, and could once again easily derail well-intentioned efforts at reform. As is typically the case with complex legislative or administrative changes, the battlegrounds will be around the details. Some of these include:
- The opportunity for new entrants into the guarantor market,
- Limitations on guarantors’ offerings and market share, and most importantly,
- Support for affordable housing and access to credit.
In Washington D.C., even when there’s a will, the way often simply can’t be found. A great number of policymakers have expressed a desire to achieve meaningful housing finance reform, but it remains to be seen if they will find a means of doing so that is tenable to all stakeholders in a period of widespread division.