Conference on the Future of Housing Finance Hosted by Treasury and HUD
(from Memo to Members, a publication of the National Low Income Housing Coalition) A conference on the future of housing finance was held on August 17 at the U.S. Department of Treasury and was hosted by Treasury Secretary Timothy Geithner and HUD Secretary Shaun Donovan. The purpose of the conference was to provide "an additional opportunity for the Administration to hear a diverse set of perspectives on the key issues surrounding housing finance reform, and to make certain that all of the best ideas are on the table as it continues to develop a comprehensive housing finance reform proposal for delivery to Congress by January 2011."
The Dodd-Frank financial reform bill passed earlier this summer did not include what will happen to Fannie Mae and Freddie Mac (the GSEs), but did direct the Administration to develop a proposal for such reform by the first of the year.
The conference was attended by approximately 200 people from the housing finance industry, academia, think tanks, Congresssional staff, Administration officials, and housing and consumer advocates. Included in the later group were NLIHC President Sheila Crowley and representatives from the Center for Responsible Lending, Consumer Federation of America, Enterprise Community Partners, NAACP, National Community Reinvestment Coalition, National Consumer Law Center, National Council of La Raza, National Fair Housing Alliance, National Urban League, NeighborWorks, Service Employees International Union, and Stewards of Affordable Housing for the Future.
Treasury Secretary Timothy Geithner called the challenge to reform housing finance both "complicated and consequential." He criticized the role the GSEs played in the housing crisis, citing their participation in the "race to the bottom," their build up of sizable portfolios without capital to cover potential losses, and their culture of big salaries and big returns to the stockholders as precipitating factors. The absence of effective oversight and the perceived government guarantee were a "toxic combination," he said.
Secretary Geithner noted that the Administration had received almost 300 responses to the seven questions it posed about the future of the housing finance system (see Memo, 7/23), and that the suggestions ranged from eliminating the government's role to expanding affordable housing opportunities. He said the Administration will "side with those who want change" and will seek reasonably priced mortgages and access to affordable homes. He cited four key policy questions that must be answered: How does the federal government provide stability to the housing finance system in both good and bad times? What role should government play in improving access to affordable housing for owning and renting? What should be done with the securitization market? Finally, how will the transition be managed to prevent further destabilization?
HUD Secretary Shaun Donovan also addressed attendees, noting that the reform of the housing finance system is about more than capital markets and securitization. He said this reform has profound implications for our economy and families and that a healthy, robust housing finance system should support responsible homeownership and provide choices for affordable rental housing. He also stressed that the system needs to support a family's ability to choose where to live. He noted that between the GSEs and FHA, the federal government is now guaranteeing over 90% of all mortgages and that government needs to have a much smaller "footprint."
The opening remarks were followed by two panels. The first panel, led by Secretary Geithner, focused on the role of government in providing a sustainable housing finance system. While most of the panel participants limited their discussion to the need for and extent of the federal government's involvement in the housing finance system, Marc Morial, President of the National Urban League, stressed the need to reform the Community Reinvestment Act, increase the supply of affordable housing, and ensure equal access to credit.
The second panel was led by Secretary Donovan and focused more specifically on the role of housing finance in meeting broader housing goals. Several panelists spoke in favor of a governmental role in rental housing, and Ellen Seidman, Executive Vice President for Mission and Strategy at ShoreBank Corporation, argued that the government, though the housing finance system, has a responsibility to address unmet housing needs such as affordable rental homes for those with the lowest incomes. Michael Stegman of the John D. and Catherine T. MacArthur Foundation said we cannot rebalance and reform housing policy without addressing the disproportionate support that government provides for homeownership over rental housing. He said there is no public policy justification for providing 10 times the subsidy to homeowners with incomes over $250,000 that we do for people in the $40,000 to $70,000 income range. Mark Zandi of Moody's Analytics said that the United States oversubsidizes housing and we are "not getting our money's worth," noting that other countries have similar rates of home ownership without such a public cost.
These panels were followed by breakout sessions on six topics: roles for the private sector and government; delivering access and affordability; funding mortgages and the role of securitization; aligning private market incentives in the housing finance chain; supporting capital for multifamily finance; and managing the transition process.
Link to a detailed agenda and attendee list at:
http://www.nlihc.org/doc/future-housing-finance8-17-2010.pdf
