On April 5th, the National Association of REALTORS® urged Congress to move cautiously when reforming government-sponsored enterprises Fannie Mae and Freddie Mac. Reforming America’s housing finance market can only be achieved through a forward-looking, comprehensive approach that supports the housing and economic recoveries, said NAR President Ron Phipps in testimony before the House Subcommittee on Capital Markets.
“As the leading advocate for home ownership, NAR strongly agrees that the existing system failed and that reforms are needed; however, redesigning a viable secondary mortgage model that will protect taxpayer dollars and serve the country’s home owners today, and in the future, can only be achieved through a methodical, measured effort,” said Phipps, broker-president of Phipps Realty in Warwick, R.I.
NAR is concerned that without a comprehensive plan for reforming the secondary mortgage market, proposed legislation to quickly constrain Fannie Mae and Freddie Mac before an adequate replacement secondary mortgage market mechanism is established will further disrupt the still fragile housing market recovery.
“REALTORS® agree that increasing private capital in the mortgage finance market is necessary for a healthy market and for reducing the government’s involvement; however, proposed legislation that relies only on private capital to operate the secondary mortgage market will slow, if not stop, the housing and economic recovery,” he said.
Phipps testified that the pendulum on mortgage credit has already swung too far in the wrong direction and is hurting consumers and the economy. He added that quick decisions aimed at punishing certain market players will only punish the taxpayers by constraining their ability to access affordable mortgage financing, and that making it harder for those who can afford a safe mortgage does not further the goals of the recovery.
“Home ownership is a pillar of our economy. NAR research shows for every two homes sold, a job is created, providing needed revenue to both our state and local economies. This must be considered when debating the future of federal housing policies,” said Phipps.
He added that overreaching rules, like the qualified residential mortgage (QRM) exemption, could further curtail access to affordable credit and will only slow economic growth and hamper job creation.
“The QRM is likely to shape housing finance for the foreseeable future, and we believe that Congress intended to create a broad QRM exemption from the 5 percent risk retention requirement to include a wide variety of traditionally safe, well-underwritten products,” said Phipps. “Congress chose not to include a high down payment among the criteria it specified in the Dodd-Frank Act. A poor QRM policy that does not heed their intentions will only increase the cost and reduce the availability of mortgage credit.”