There has been considerable action on GSE reform in the House. NAA/NMHC have participated in a number of hearings, offering statements and witness testimony. The most recent occurred on May 26, when NAA/NMHC offered the Senate Banking Committee the multifamily perspective of what works—namely the multifamily programs—in the existing finance system. Testifying on our behalf, Mark J. Parrell, Executive Vice President and Chief Financial Officer of Equity Residential, explained that Fannie Mae and Freddie Mac’s multifamily programs were not part of the meltdown and are not broken. He warned lawmakers that without a federal credit backstop, the apartment industry cannot meet the nation’s current or future housing needs.
In the House, Republicans are pursuing a dual-track approach to reform efforts. In addition to the individual, smaller bills, the committee may also consider a larger, more comprehensive GSE reform bill (HR 1182) introduced by Rep. Jeb Hensarling (R-TX). That bill would completely privatize the housing finance system over the next five years. While several of the bills may ultimately win passage by the full House, they will face an uphill battle in the Senate, where there is considerable resistance to many of the measures.
In separate action, Rep. John Campbell (R-CA) and Rep. Gary Peters (D-MI) have introduced a bill (HR 1859) that would replace Fannie Mae and Freddie Mac with a hybrid system using private capital supported by a federal credit guarantee. The measure would wind down the GSEs over five years and place them in receivership. In their place, it would create five chartered entities. The mortgage bonds issued by the entities would be backed by an explicit government guarantee. The guarantee would not, however, apply to the issuers.
HR 1859 essentially embraces the “third option” of continuing to offer a more limited guarantee at all times suggested by the U.S. Treasury Department’s February white paper on GSE reform. The other two options presented were completely eliminating Fannie and Freddie or only providing federal credit guarantees during times of crisis.
NAA/NMHC continue to advocate for a federal backstop for rental housing at all times—not just in times of crisis—based on the unique needs of the apartment market, which cannot get its credit needs fully met by the private sector. In fact, the Wall Street Journal published a letter to the editor from NMHC Chairman Peter Donovan on May 3. Donovan’s letter responds to an April 21 Op-Ed by Peter Wallison, a senior fellow at the American Enterprise Institute, which suggested fully privatizing our housing finance system.
In response, NAA/NMHC noted that while the housing market should primarily rely on private capital, there is no question that for the foreseeable future a private-market only solution is impractical for rental housing and will have serious detrimental consequences for the 17 million Americans who rely on it.
Also, on May 2, NAA/NMHC joined a coalition of 17 real estate organizations in running a full-page ad in National Journal magazine outlining a set of principles for GSE and multifamily financing reform. While emphasizing the need to attract private money back to mortgage finance markets, the coalition also said “an appropriate and clearly defined role for the government is essential to preserving financial stability.”