The Obama Administration on April 22 issued a notice calling for public comment on the future of the housing finance system, including Fannie Mae and Freddie Mac, and the overall role of the federal government in housing policy. The notice includes seven key questions for industry groups, academic experts and consumer groups, including how federal housing finance objectives should be prioritized and what kind of lending standards should be established. In addition to seeking written comments, the notice indicates that a series of public forums on housing finance reform will be held in the coming months.
The notice coincided with the U.S. Department of Housing and Urban Development (HUD) Secretary Shaun Donovan’s testimony at a second hearing before the Financial Services Committee on housing finance reform (NAA/NMHC testified at the first hearing held March 23). During the hearing, Donovan said that the Administration would not issue a formal legislative proposal for the GSEs until next year and warned that “hasty action” would threaten the fragile economic recovery.
During the Senate debate over the financial regulatory reform bill (S 3217) Democratic leaders successfully tabled a push by Republicans seeking GSE reform legislation this year. On May 11, the Senate rejected an amendment to S 3217 that would have ended the government conservatorship of Fannie Mae and Freddie Mac in two years. The amendment, co-sponsored by Sen. John McCain (R-AZ), Senate Banking Committee ranking member Richard Shelby (R-AL) and Senate Budget Committee ranking member Judd Gregg (R-NH), also called for abolishing the firms’ affordable housing goals and gradually shrinking their portfolios.
Instead, the Senate approved an amendment sponsored by Banking Committee Chairman Christopher Dodd (D-CT) that calls for the Obama Administration to issue a proposal on revamping U.S. housing finance by Jan. 31, 2011. This timeframe coincides with the Administration’s timetable for GSE reform. Given that the House-passed financial reform measure does not include any deadlines related to GSE reform, the issue is essentially off the legislative radar until next year, political rhetoric notwithstanding.
The McCain-Shelby-Gregg amendment came just days after Fannie Mae and Freddie Mac announced that they would need an additional $20 billion in government funds to cover losses in their single-family portfolios. Notably, based on the firms’ first-quarter earnings statements, their multifamily programs generated revenues of $320 million and remain well capitalized with $2.7 billion to cover future losses. On a combined basis, their seriously delinquent rate for multifamily loans is less than 0.61 percent, compared to 5.42 percent for Fannie Mae’s single family loans and 4.13 percent for Freddie Mac’s.
NAA/NMHC have been actively educating Congress on the importance of considering the multifamily housing sector’s unique needs in a future federally supported secondary market, and NAA/NMHC will submit comments to the Administration.