MReport April 2021

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M REPORT | 63 SECONDARY MARKET THE LATEST O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T Sen. Toomey Introduces Framework for Housing Reform As part of his "guiding principles for reform," Banking Committee member Pat Toomey says he has set the stage for ending "the government-sponsored enterprise duopoly," and more. T he Senate Banking Committee held a virtual hearing titled, "Home = Life: The State of Housing in America," during which, according to a presser from the Banking Committee, members held "a robust discus- sion on the issue of housing finance reform." Ranking Committee Member Pat Toomey (R-Pennsylvania), in conjunction with the hearing, re- leased a set of "guiding principles for housing finance reform." Senator Toomey in said proposal set the framework for legislation "to end the government- sponsored enterprise (GSE) duo- poly and foster a liquid secondary mortgage market while protecting taxpayers and promoting equitable access for all lenders." "The housing finance system remains in urgent need of reform," Toomey said. "The current system exposes taxpayers to risk of fu- ture bailouts, fosters excessive risk taking, and crowds out private capital. I hope my colleagues, the administration, and all inter- ested stakeholders will join me in working to implement these responsible reforms to prevent yet another financial crisis." Here are key points from Toomey's plan for housing fi- nance. He aims to: • Transition the GSE duopoly toward a competitive secondary market • End the conservatorships of Fannie Mae and Freddie Mac • Establish a level playing field for other sources of private capital that bear mortgage credit risk • Foster a liquid secondary mortgage market that promotes the continued availability of af- fordable 30-year and other long- term fixed-rate mortgage loans across the United States and throughout the economic cycle • Protect taxpayers by ensuring that significant first-loss private capital stands in front of any government support and that taxpayers are appropriately compensated for that support • Promote equitable access to the secondary mortgage market by mortgage lenders of all sizes, business models, charter types, and locations; and • Provide for a smooth transi- tion to the reformed housing finance system by ensuring that reforms are incremental and realistic, leveraging the existing regulatory and market struc- ture. On behalf of the National Association of Realtors (NAR), Charlie Oppler, a Realtor from Franklin Lakes, N.J., and the CEO of Prominent Properties Sotheby's International expressed sup- port for Toomey's statement and priorities, saying, "The GSEs now support nearly 80% of the U.S. residential market, and it is more important than ever that Fannie and Freddie's transition from conservatorship be developed collaboratively and deliberately. While some points of disagree- ment remain, we look forward to working with Senator Toomey and policymakers from both sides of the aisle as these conversations progress over coming months." In his remarks, Toomey point- ed out that the housing market is cyclical. "It's a question of when—not if—there will eventually be a housing downturn. The GSEs and the housing finance system are not prepared. FHFA Director Calabria and the last administra- tion made significant progress in reforming the system. Thanks to their good work, the net worth sweep has been suspended, and the GSEs finally have begun to build capital under a constructive new capital rule." He added that "more than 12 years after the financial crisis, Congress has still not addressed the fundamental flaws in the system that led to the crisis." Finally, Toomey says, "I know we have significant differences about the role of government in the housing market, but I believe com- promise is possible. There is much that can be productively done on a bipartisan basis in this Congress." Toomey's entire remarks are recorded at Toomey's colleague, Sherrod Brown (D-Ohio), said that, al- though many things have changed for the better in housing, there is more to the story. "More than one-in-five home- owners are still paying more than one-third of their income for hous- ing. The number of lower-income homeowners has continued to shrink. And most concerning of all, perhaps—the Black homeown- ership rate is as low as it was when housing discrimination was legal," he said. "And behind every one of these numbers is a family with a story." "The housing finance system remains in urgent need of reform." —Pat Toomey (R-Pennsylvania)

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