When will real reforms occur for the GSEs? Today? Tomorrow? 2013?
Remarks made by HUD Secretary Shaun Donovan have confirmed the Obama White House has no immediate plans to reform the country’s GSEs “anytime soon.”
Though HousingWire, which reported on Donovan’s statement, highlighted the political nature of the policy – that no substantive GSE policy would take place in an election year – the comments seem to more fully answer a lingering question we had asked back in March on what the government’s attitude truly was toward the GSEs.
The comments, which came before a Senate Banking Committee meeting yesterday, contradict recent policy initiatives by the FHFA, which had committed to a Dec. 31 end date for establishing a securitization plan for Fannie Mae and Freddie Mac, the long-troubled GSEs that the agency was supposedly winding out of existence.
Yet, as the agency slowly moved toward abolishing the two companies (and indeed, as HousingWire noted, the Treasury Department released a white paper in 2011 detailing how to deal with the GSE problem), the White House grew more and more dependent on the entities for its expansive housing policies, a divergence in approaches that made many wonder what the government’s attitudes truly were on Fannie and Freddie.
The confusion at the executive branch, though, has done little to quell legislative efforts at reigning in the GSEs. As HousingWire notes, more than a dozen reform bills were passed in the House of Representatives last year alone, many of them reflecting attitudes similar to that of FHFA Acting Director Edward DeMarco. One bill, by Reps. John Campbell and Gary Peters, was a bipartisan effort that would have created five new GSEs backed by a sole fund. Another, by Senator Bob Corker, would have slowly drawn down Fannie and Freddie’s business and passed their guarantees to the private sector.
Such measures are unlikely to go forward, however, without a sustainable housing recovery, as HousingWire notes. Though the housing market is undoubtedly on firmer footing than in 2011 (and we just spotlighted two examples the last couple days), the article notes that “industry trade groups argue the government-backed firms are needed to keep liquidity moving through the market, and that any drastic action could jeopardize what little rebound there has been.”
Brian Guzman, an agent with Coldwell Banker, said via e-mail that any ideas for any GSE reform are just that – ideas.
“15 years?” he said, on when real reform would take place. “It seems like it is simply an idea at this point. There could conceivably be 4 years just to lay out and agree on the procedure and logistics.”
But even after that process, it will be no easy feat removing the two giants from the mortgage market, he said.
“It is definitely a slow burn with the getting out of mortgages,” he said. “The private investors and banks will have to keep as competitive as possible while Freddie/Fannie elevates their fees/cost of facilitating the loan. If the credit/lending market tightens up again, there will most likely be a goverment backstop.”