Johnson, Corker see larger private market role in housing finance
Oct. 2, 2013 – Senate Banking Committee Chairman Tim Johnson, D-S.D., said during a hearing attended by NAFCU Tuesday that private capital could have a larger role than it does now in the housing finance market.
“At the height of the housing boom, private capital represented more than 50 percent of the mortgage market. Today, it is closer to 5 percent,” Johnson said in his opening statement. “While government-backed loans represent 95 percent of the current market, the volume of government-backed loans has not changed that much. What has changed is a major reduction in volume by the private market.”
During the hearing, titled “Housing Finance Reform: Fundamentals of a Functioning Private Label Mortgage Backed Securities Market,” Johnson said he agreed the private market could play a larger role in housing finance reform and that any system reform will need to include a way to attract private capital.
Tuesdays’ hearing witnesses included Redwood Trust CEO and Director Martin Hughes, Association of Institutional Investors President John Gidman and Georgetown University Law Center Professor Adam Levitin. While the three concluded there is room for private capital within housing finance reform, they said the government still needs to play a role.
Sen. Bob Corker, R-Tenn., co-author with Sen. Mark Warner, D-Va., of S. 1217, the “Housing Finance Reform and Taxpayer Protection Act,” said while details in his bill can be adjusted, it’s clear that the model of layering private capital before a government backstop is the way to go forward. He said this would encourage a larger private label footprint and spur investor confidence in the market.
The 30-year fixed-rate mortgage was also addressed during the hearing and Sen. Mike Johanns, R-Neb., said preserving it is a priority.
NAFCU continues to reiterate that any housing finance reform effort should ensure credit unions continued, unfettered access to the secondary mortgage market and fair pricing that recognizes the high quality of credit union underwriting.
NAFCU's housing finance reform issue page