The National Association of REALTORS® (NAR) thanked the White House for its work to reform America’s housing finance system after the Trump administration released a proposal that could take Freddie Mac and Fannie Mae out of government conservatorship for the first time since 2008.
“The NAR thanks President Trump and his administration for initiating thoughtful, genuine effort toward housing finance reform,” said NAR President John Smaby. “We look forward to reviewing the proposal in more detail and are optimistic that, at a minimum, the White House’s efforts will shed light on the remaining mile markers on the path to reform, along with the critical role the Government Sponsored Enterprises and the Federal Housing Administration play in America’s housing market.
“NAR continues working with the White House and Congress as we move closer to securing palatable, pragmatic improvements to our housing finance system, and we maintain our belief that NAR’s blueprint for GSE reform represents the best path forward for this system and our economy,” said Smaby. “Our proposed utility model, as any successful reforms must, highlights competition, protects taxpayers and remedies the failures of the pre-crisis system while ensuring equal access for responsible, mortgage-ready Americans in every market, safeguarding the role the GSEs were intended to play in our housing market.”
The Washington Post reported that the goal of the plan — which includes close to 50 proposals — is shrinking the government’s role in the housing market. Freddie Mac and Fannie Mae back about half the country’s mortgages.
“(The proposals will) protect taxpayers and help Americans who want to buy a home,” said Treasury Secretary Steven Mnuchin in the Washington Post article. “An effective and efficient federal housing finance system will also meaningfully contribute to the continued economic growth under this administration.”
Congress must take action before the Trump administration’s ideas can be implemented, the Washington Post reported. However, the Federal Housing Financial Administration could take some actions without Congress.
The release of the White House plan comes a few weeks after the results of annual financial stress tests on Fannie Mae and Freddie Mac were announced. The tests showed that risks associated with the two government sponsored enterprises have been reduced by 80 percent in the last five years. A report this week, by the Harvard Joint Center for Housing Studies credited the work done to strengthen the companies.
The report’s author, Senior Industry Fellow Don Layton, CEO of Freddie Mac from May 2012 until June 2019, wrote that those results indicate the two businesses have been reformed, are strong enough to “absorb adverse scenario losses” and have enough capital to maintain market confidence even after an adverse scenario.
“It’s a quiet but major policy success that should get more attention in Washington,” says Layton.