Over the last few months, several groups, including 32 congressional Democrats, attempted to push the Federal Housing Finance Agency to allow Fannie Mae andFreddie Mac to rebuild their dwindling capital base.
The letter sent by the congressional Democrats asked FHFA Director Mel Watt to use the supposed authority granted to him by the Housing and Economy Recovery Act of 2008 to let Fannie and Freddie hold capital instead of funneling it to the Department of the Treasury, as is stipulated by the Preferred Stock Purchase Agreements that went into effect when the government took Fannie and Freddie.
In the wake of that letter, a group of the largest trade organizations in housingdelivered a strong rebuke to the Democrats’ efforts, as the Mortgage Bankers Association, National Association of Realtors, American Bankers Association, National Association of Home Builders, and the National Housing Conference said that their view is that “comprehensive reform to the secondary housing finance system must come through Congress,” rather than from Watt and the FHFA.
Thus far, the FHFA has not responded directly to those efforts, but Watt did take part in the Financial Stability Oversight Council’s annual report, which stated that it believes that Congress needs to take the lead on housing finance reform to fully stabilize the country’s housing finance system.
But just how far down the road is housing finance reform? The conclusion of the senators’ letter gives insight into the lack of inertia for GSE reform in the current Congress.
Spoiler alert: Don’t hold your breath for GSE reform this year.
“In closing, we are hopeful that housing finance reform will be on the agenda for the next Congress and Administration and look forward to working with you on that effort,” the senators conclude. “Until that time, we strongly encourage you to focus your efforts on steps that would help, not hurt, housing finance reform legislation.”
To read the senators’ full letter, click here.