January 30, 2019

White House to work with Congress on housing finance reform

housing marketThe White House will work with Congress to reform the nation's housing finance system and government-sponsored enterprises (GSEs), according to reports from the Wall Street Journal. NAFCU has urged the Trump administration and Congress to work together on a comprehensive solution to housing finance reform, and has argued that the continued conservatorship of the GSEs is unsustainable

This signals a shift from comments made by Federal Housing Finance Agency (FHFA) Acting Director Joseph Otting at a recent staff meeting where he said that a housing finance reform plan from the administration and Treasury Department could come within the next month. After that, Otting said he expects significant progress to be made within "six to 18 months." Otting said that the FHFA Director and Treasury had the authority to make significant changes to the GSEs without legislation.

The Wall Street Journal article also indicates the plan will be released soon, but clarified that the administration will work with Congress to ensure safeguards are in place to protect taxpayers.

In November, NAFCU provided comments to the FHFA on its proposed capital rule for the GSEs. The association generally supports the proposal, but recommended the FHFA allow the GSEs to submit capital restoration plans as allowed under the Housing and Economic Recovery Act (HERA) – a provision that makes clear Congress envisioned a path to remove the GSEs from conservatorship. NAFCU also argued that restoration plans shouldn't be approved until Congress has agreed to codify certain safeguards.

NAFCU President and CEO Dan Berger sent a letter to Otting on 2019 priorities earlier this month that reiterated the need to ensure credit unions' unhampered access to the secondary mortgage market in any reform actions, and also asked for clarification on how the new proposed capital requirements rule could affect their ability to sell loans to the GSEs, among other things.

NAFCU has previously shared its core principles for housing financial reform that should be included in any final reform measures with lawmakers and numerous officials in the Trump administration. The association's core principles are also cited in a recent report from the Government Accountability Office (GAO) calling on Congress to consider housing finance reform legislation. The GAO report notes the need for safeguards to reduce risk as the GSEs are recapitalized.