The influence of the government-sponsored enterprises over the mortgage market will decline, under a proposed plan for housing market reform proposed in outline form by Senate Banking Committee Chairman Mike Crapo, R-Idaho.

That’s because under his plan mortgage guarantors would be private companies including Fannie Mae and Freddie Mac, and they would operate under far more narrow regulatory parameters than is now the case.

Although the government-sponsored entities are earning profits, in another housing downturn taxpayers might be responsible for billions of dollars—as they were in 2008 when Fannie Mae and Freddie Mac were placed in conservatorship—where they remain, according to a press release from the senator. Conservatorship is neither sustainable, nor in the best interest of consumers, taxpayers, investors, lenders or the broader economy.

[caption id="attachment_9623" align="alignright" width="234"] Sen. Crapo[/caption]

“We must expeditiously fix our flawed housing finance system,” said Crapo. “My priorities are to establish stronger levels of taxpayer protection, preserve the 30-year fixed-rate mortgage, increase competition among mortgage guarantors, and promote access to affordable housing.”

The role of guarantors would be to guarantee the repayment of principal and interest to investors. In addition, they could issue guarantees on eligible mortgages securitized by primary market participants or issuers. Guarantors could purchase them from the primary market through a cash window and guarantee and securitize them through a securitization platform that Ginnie Mae will operate.

There would be limits on the percentage of mortgages a guarantor could guarantee. And a guarantor wouldn’t be allowed to offer volume discounts on the guarantee fee or other terms.

In addition, the multifamily business of Fannie Mae and Freddie Mac will be sold and operated as independent guarantors.  Insured depository institutions won’t be permitted to be guarantors, and they won’t be permitted to offer volume-based discounts on the guarantee fee or other terms.

The Federal Housing Finance Agency will be permitted to require guarantors to engage in approved credit risk transfers. FHFA can consider the quantity and quality of credit risk transfers when establishing capital requirements for a guarantor, all of whom will be required to remain above the statutory minimum leverage ratio.

Mortgage rates have inched up after weeks of moderating, according to the Primary Mortgage Market Survey from Freddie Mac.

“Purchase applications were down this week after soaring early in the year,” said Sam Khater, chief economist for Freddie Mac. “However, softening house price appreciation along with increasing inventory of homes on the market, and historically low mortgage rates, should give a boost to the spring home buying season.”

[caption id="attachment_9187" align="alignright" width="214"] Sam Khater[/caption]

Below are additional takeaways on interest rates:

• The 30-year fixed-rate mortgage averaged 4.46 percent with an average 0.5 point for the week ending Jan. 31, 2019, up from last week when it averaged 4.45 percent. A year ago, the 30-year fixed-rate mortgage averaged 4.22 percent.
• The 15-year fixed rate mortgage averaged 3.89 percent with an average 0.4 point, up from last week when it averaged 3.88 percent. A year ago, the 15-year fixed-rate mortgage averaged 3.68 percent.
• The five-year Treasury-indexed hybrid adjustable-rate mortgage averaged 3.96 percent with an average 0.3 point, up from last week when it averaged 3.9 percent. A year ago at this time, the 5-year adjustable-rate mortgage averaged 3.53 percent.

The Federal Housing Finance Agency appointed John Roscoe to serve as chief of staff. He will report to Joseph Otting, acting director of the agency and assume his new position on Feb. 4.

“John is a dynamic and collaborative leader with a track record of success. He brings to the position the solid judgement that comes from working at a very high level across all ​branches of government,” said Otting.

The timing of Roscoe’s appointment, however, might not be coincidental.

That’s because just days after joining the agency in early January, Otting told FHFA employees and at least one reporter that a plan to remove Fannie Mae and Freddie Mac from conservatorship is imminent.

Those comments were not well received by some high-ranking Democrats.

[caption id="attachment_9328" align="alignleft" width="237"] Sherrod Brown[/caption]

Rep. Maxine Waters, D-CA., and Sen. Sherrod Brown, D-OH, wrote to tell him that they hadn’t seen “a comprehensive statement from the White House and Treasury Department under the Trump Administration providing their views on regulation of the housing finance system.”

Also, they want to understand how the plan would affect underserved communities, such as low- and moderate-income households, rural areas, affordable rental housing, and manufactured housing. So, helping Otting avoid political entanglements like this one, could be one of Roscoe’s responsibilities.

Waters is chairwoman of the House Financial Services Committee, and Brown is ranking member of the Senate Committee on Banking, Housing, and Urban Affairs. Otting is also the Comptroller of the Currency.

Roscoe joins FHFAfrom the White House Office of Presidential Personnel, where he was special assistant to the president. His work has helped shape economic, trade and regulatory policy. Before joining the White House, Roscoe served in senior positions in the private sector and the Ohio state government, including in the treasurer’s office.

“I am honored by this appointment and look forward to working with Acting Director Otting and the highly respected FHFA team,” said Roscoe.