Nov 7, 201112:03 PMBlog: Building Alaska
Home Builders Weigh In on Garrett’s Housing Finance Proposal
Rep. Scott Garrett (R-N.J.), chairman of the House Financial Services Subcommittee on Capital Markets and Government Sponsored Enterprises, on Nov. 3 held his first hearing on his discussion draft legislation to reform the nation’s mortgage markets.
Garrett's bill directs the Federal Housing Finance Agency <http://newsmanager.commpartners.com/linktrack.php?url=http%3A%2F%2Fwww.fhfa.gov%2F> to set standards and underwriting criteria for several categories of mortgages, and develop standards and uniform practices for issuing mortgage-backed securities in an effort to spur continued and sustained investor participation in the market without a federal guarantee.
Garrett intends this proposal to be combined with additional subcommittee-passed bills that would slowly diminish the federal backstop for housing now being provided by Fannie Mae and Freddie Mac.
NAHB has told Garrett that while the association is willing to work with him to ensure that any future private securitization market is strong and vibrant, the association strongly believes that Congress must preserve some form of government guarantee for mortgage-backed securities to ensure a reliable and adequate flow of affordable housing credit under all economic and financial conditions.
In a letter sent to Garrett and subcommittee members ahead of the hearing, NAHB reiterated that message.
“We believe that changes to the housing finance system should be comprehensive, coordinated and undertaken in a careful and deliberate manner that does not disrupt the nascent housing recovery,” the letter said. “Furthermore, NAHB insists that a continuing and predictable government role is necessary to promote investor confidence and ensure liquidity and stability for homeownership and rental housing.
While NAHB believes that private capital must be the dominant source of mortgage credit, the letter stated that “the future housing finance system cannot be left entirely to the private sector. The historical track record clearly shows that the private sector is not capable of providing a consistent and adequate supply of housing credit without a government backstop.”
During the hearing, Rep. Barney Frank (D-Mass.) specifically cited NAHB when he recommended a second hearing to allow other witnesses to address concerns over the legislation and the path forward for the future of the nation's housing finance system.
NAHB is likely to focus its opposition on the dismantling of Fannie and Freddie’s federal backing rather than on the specific provisions proposed in the bill.
NAHB will closely monitor the situation and keep the membership updated on this legislative proposal.
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