A sound housing finance system that provides a stable and affordable supply of credit for home buyers and rental housing is essential to ensure a healthy housing market, spur job creation and maintain a strong and resilient economy.
In the wake of the financial crisis, the private market is clearly not working. The Federal Housing Administration, Fannie Mae and Freddie Mac currently guarantee or insure more than 90 percent of all home mortgage activity and private lending institutions have shown little inclination to step up to the plate. Even with the current high level of federal support, fewer mortgage products are available now than in the past, and these loans are being underwritten on much more stringent terms.
Policymakers are now looking at several proposals to wind down Fannie Mae and Freddie Mac and are weighing several options to encourage increased participation from private financial institutions. Any transition must be done in a careful and deliberate manner to avoid further disruptions to an already fragile housing finance system. The question is what will replace Fannie Mae and Freddie Mac and fill the void of their departure?
Complicating the situation, the federal government is looking to trim back the Federal Housing Administration’s participation in the market, which would further limit the availability of low downpayment mortgages.
As the private market assumes a greater role in the mortgage marketplace, maintaining an appropriate level of government support is essential to preserve financial stability, promote investor confidence and ensure liquidity and stability for homeownership and rental housing.
NAHB has presented lawmakers with a detailed proposal on restructuring the housing finance system to provide a consistent supply of mortgage liquidity and retain a federal backstop while limiting taxpayer exposure. Actively involved in this issue, the association continues to encourage all congressional efforts that seek an appropriate federal role to ensure a reliable and adequate flow of affordable housing credit.
For more information, click on the links below:
- Home builders announce housing finance system reform plan
- Summary of NAHB policy on housing finance system reform
- NAHB white paper on a comprehensive framework for housing finance system reform
- NAHB policy resolution on a comprehensive framework for housing finance system reform
- Principles for restoring stability to the nation’s housing finance system