Congress Must Act

Housing Finance Reform Must Be Tackled by CongressThe “Sustainable Housing Finance” hearing took place yesterday morning. Please take a minute to read and / or listen to what is being said.

Hensarling: Congress Must Tackle Housing Finance Reform

WASHINGTON – House Financial Services Committee Chairman Jeb Hensarling (R-TX) delivered the following opening remarks at today’s hearing on sustainable housing finance reform:

Today we welcome back our former colleague and committee member Mel Watt, the Director of the Federal Housing Finance Agency. Director Watt served with distinction on this committee for many, many years and was respected on both sides of the aisle. Sir, it is good to have you back in our hearing room.

As we know, FHFA oversees the two enormous government-sponsored mortgage-buying corporations, Fannie Mae and Freddie Mac, as well as the 11 Federal Home Loan Banks.

As all Americans painfully remember, in 2008 taxpayers were forced to bail out these $5 trillion behemoths that imperiled not only the U.S. housing market but also the entire global financial system.

It was the largest taxpayer-funded bailout in history and the GSEs have been wards of the state ever since.

Taxpayers should never be put in that position again. Yet Fannie and Freddie’s nine-year conservatorship little has fundamentally changed. The GSEs are today as big as they were before the financial crisis.

They represent a virtual government monopoly in housing finance that lacks meaningful competition or innovation. Taxpayers remain on the hook for $5.3 trillion. Underwriting standards are being eroded. I fear a number of the mistakes that led to the 2008 crisis are being repeated today.

Clearly it is time – in fact it is well past time – for Congress to enact sustainable housing finance reform with private capital at its center. It is time to get off the boom, bust, bailout cycle.

In order to move forward, we need to first critically assess the state of the GSEs’ nine-year conservatorship. This hearing provides an opportunity to do just that.

The two most significant developments in the conservatorship clearly have been the credit-risk transfer programs and the common securitization platform. Virtually everyone believes that these two developments are key points in the transition to a housing finance system in which private capital plays the predominant role.

Yet, despite these positive developments, there have been other changes under the conservatorship that are cause for concern.

Those of us who worry about another taxpayer bailout should be worried about efforts to lower down-payment requirements, raise the debt-to-income ratio, and divert funds to a housing trust fund that lacks accountability—all the while taxpayers who paid to bail out the GSEs in 2008 remain in harm’s way.

This Congress and this moment represent our best chance to move forward towards building a long-term sustainable housing finance system that allows Americans to buy homes they can actually afford to keep.

And Director Watt, I peaked at your testimony and I wish to quote it and save you a little effort later on: “I have said repeatedly, and I want to reiterate, that these conservatorships are not sustainable and they need to end as soon as Congress can chart the way forward on housing finance reform…I reaffirm my belief that it is the role of Congress, not FHFA, to make these tough decisions that chart the path out of conservatorship and to the future housing finance system.” I quote our witness Director Watt.

I agree completely with that portion of the director’s testimony and I look forward to working with him and I look forward to working with my colleagues on both sides of the aisle to tear down the vestiges of the failed GSE experiment and build in its place a new housing finance system that provides opportunity, affordability, and sustainability for homeowners, for taxpayers and for the broader economy.

VaCAP Board
VaCAP Board

VaCAP Board

Coalition of individual appraisers working together to unite, promote and protect the collective interests of all appraisal professionals in Virginia; to promote needed changes in laws, rules, regulations, policies and standards affecting all appraisers in Virginia; to observe and report the actions of regulatory, legislative, oversight, and standards-setting entities of the Commonwealth.

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5 Responses

  1. Avatar Xpert says:

    Of course not a peep about PIW

  2. Avatar John says:

    Four hours I will never get back. I am amazed about how unsure Director Watts is on so many issues.  He gets a fresh start every five  minutes, and does not have control over any of the conversations. Truly sad.

  3. Baggins Baggins says:

    I’m going to carve out 4 hours for this here soon.  Probably why this thread did not get as much traction.  Anyone care to rip and chop this down to the best portions?  Are there transcripts?

  4. Baggins Baggins says:

    Thank you, listening now.  Oh man, the AI residential update newsletter just hit.  Objection to waivers, 35 groups fighting, the final rule for amc registry fees, gse overhaul within a year, mortgage fraud up 17% in relation to increase in purchase market activity, veterans have been targets of predatory type lending, high price is high risk, and of course, wells in the news again.  It’s going to be a bumpy ride.  Another total process shift again, just a few years later?  The government can not regulate away risk, they have to be willing to let companies go under if they make poor decisions in order for necessary free market corrections to occur.


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Congress Must Act

by VaCAP Board time to read: 3 min