Regulatory Reform of GSEs Is Needed, MBA, NAHB Tell Congress

By Anuradha Kher, Online News EditorWashington, D.C–Kieran P. Quinn, CMB, chairman of the Mortgage Bankers Association (MBA), and Jerry Howard, executive vice president and CEO of NAHB, recently testified before the U.S. Senate Committee on Banking, Housing and Urban Affairs at a hearing titled, “Reforming the Regulation of the Government-Sponsored Enterprises.”“MBA has long advocated regulatory reform to ensure the GSEs are operating in a safe and sound manner, engaging in activities consistent with their charter purposes, and are subject to reasonable affordable housing goals that do not distort the market,” Quinn told the committee. “MBA is particularly interested in the powers of the regulator related to the review and approval of GSE activities, ongoing and new,” Quinn said. The new regulator should be given the explicit authority and direction to ensure that the charter and other applicable law of the GSEs permit their activities.MBA believes that the GSEs’ portfolios are important tools that augment their ability to help stabilize mortgage markets and encourage affordable housing. “Because markets are dynamic, the GSEs need flexibility to adjust their portfolios in response to changing conditions and marketplace needs,” Quinn said.The House-passed bill’s treatment of portfolio regulation is consistent with MBA policy, Quinn said. Meanwhile, NAHB is calling on Congress to move quickly to enact comprehensive regulatory reform for Fannie Mae, Freddie Mac and the Federal Home Loan Banks that will ensure their financial safety and soundness and allow them to pursue their housing mission.“At a time when the housing market needs them more than ever, Fannie and Freddie have failed to adequately respond to the mortgage crisis,” NAHB’s Howard told members of the Senate Banking Committee. “Rather than aggressively pursue market solutions, they are hunkering down to shore up financial results and shareholder returns.”Because their regulator, the Office of Federal Housing Enterprise Oversight (OFHEO), continues to impose a 30 percent capital surcharge on both, Fannie and Freddie are attempting to build their capital reserves by imposing higher fees that will raise mortgage borrowing costs at the worst possible time, Howard said. “OFHEO is constraining the ability of Fannie and Freddie to do all they can to promote affordable housing and to help strapped borrowers. At the same time, HUD’s mission oversight over the two GSEs is lacking. HUD should be requiring them to do more, not less, in the present dire mortgage market circumstances,” said Howard. “This just underscores why major reform of this flawed, bifurcated regulatory framework is long overdue and urgently needed,” Howard maintained. NAHB believes that H.R. 1427, the “Federal Housing Finance Reform Act of 2007,” which passed the House last May, makes significant progress in allowing the GSEs to operate in a safe and sound manner while preserving the vitality of their government-sponsored status for the fulfillment of their vital housing mission.