Several steps can be taken can be taken to reform and strengthen the U.S. housing finance system even in the absence of federal legislation, according to a report.
It recommends measures to strengthen the housing finance system, including greater transparency into Federal Housing Finance Agency oversight of government sponsored enterprise activities, and more risk-based pricing combined with explicit affordable housing subsidies, according to "A Blueprint for Administrative Reform of the Housing Finance System,” from the Milken Institute Center for Financial Markets.
Further, it suggests a government sponsored enterprise rule that supports a housing finance system driven by private capital that can survive future downturns and maintain liquidity for creditworthy borrowers throughout the economic cycle. Also, among its recommendations are actions for the Consumer Financial Protection Bureau to take regarding the ability to repay-qualified mortgage rule and generating innovation while maintaining consumer protection.
The Federal Housing Finance Agency, Treasury Department, CFPB and others can take steps, even in the absence of legislation to reform the housing finance landscape and reduce barriers to achieving the bipartisan legislation required to finalize the post-crisis housing finance reform effort.
Until legislation is passed, the conservatorship of Fannie Mae and Freddie Mac should continue until Congress passes legislation to resolve critical GSE charter flaws and establish a safer, more effective system.
In addition, the following reforms are also included in the report:
- Expanding the functionality of the Common Securitization Platform and opening access to key GSE technologies to future competitors.
- Reducing or eliminating the GSEs' presence in markets that are adequately served by the private sector, such as second-home financing and most cash-out refinancing.
- Providing Ginnie Mae and FHA with resources to improve technology and operations.
- Making better use of the Federal Housing Finance Oversight Board to strengthen coordination among components of the housing finance ecosystem.
"These recommendations are drawn from deep expertise in our housing finance policy team, who bring decades of government and industry experience along with a commitment to crafting bipartisan solutions by focusing on substantive policy goals and the tools available to achieve them," said Michael Piwowar, executive director of the institute and a former commissioner and acting chairman of the Securities and Exchange Commission.
