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38 | M R EP O RT FEATURE When Government and Industry Meet MReport speaks with mortgage industry veteran Frank Pallotta as he approaches election day in his run for congress in the 5th District of New Jersey. By David Wharton I n 2020, MReport profiled mortgage industry veteran Frank Pallotta, who was then running for the U.S. House of Representatives for the 5th District of the state of New Jersey. After a strong but un- successful showing in that year, Pallotta is now back on the ballot and hoping to flip his district in November's election. (To read our previous interview with Pallotta, visit themreport.com/ daily-dose/07-02-2020/trading-mort- gage-for-politics) With a career that took him through several decades of work within the financial services sector, including stints at Goldman Sachs and Credit Suisse, Pallotta once again took some time to speak with MReport amidst the hectic schedule of the campaign trail. He spoke about his priorities and focuses for this election cycle, the challeng- es facing the American housing market, and what he hopes to accomplish should he emerge successful from this election. ' How can the government and the mortgage and housing industries work to help renters and homebuyers surmount the many headwinds facing Americans in search of homeownership or even just affordable rental housing in 2022 and beyond? H omeownership is something we've seen pick up not just over the last 10 years. This is something we've seen across the last 50, or 60, or 70 years. It's helped move a lot of people out of poverty. It's helped move a lot of people from middle class to different levels. What the gov- ernment has done in the past, for the most part, has been great. The GSEs do a tremendous job of helping provide, not just liquidity, but opportunities. We have seen some challenges over the last 20 or 25 years. Clearly, in 2008, we saw some challenges where credit was being stretched, but then we saw interest rates come down. We saw more sound guidelines coming into play. It was the marriage of both the public and the private sectors, coming together to find out, first and foremost, how to protect taxpayers. The GSEs, as we know, guarantee timely payment of principal and interest, and they do that in a way that ensures they put together a structure and a set of guidelines that protect taxpayers when they offer the opportunity to securitize those loans, and back those loans. As the world evolves, as our economy evolves, first and foremost, we obviously have to protect the shareholders, which means the taxpayers in these instances. We also have to make sure that, while homeownership is more privileged than anything else, that it's done in a responsible way. I would guess the vast majority of those who use government-backed programs, whether it's their VA programs or other HUD-related programs, or Fannie or Freddie programs, that it's happened in a way that people have used those, not as a crutch, but as an oppor- tunity to do what's best for them and their families. I would always like to consid- er—because I think it's worked, if it's done in a sound way—the marriage of the public and private sectors. Not just the ability to provide liquidity into the capital markets by guaranteeing loans through Fannie and Freddie and Ginnie and then having them trade in the capital markets, but by being creative. I think the private sector is creative. The government needs to work with the private sector in a sound way, again, that protects the taxpayers in helping provide more homeownership. What I mean by that is, if there are ways, as credit standards are changing, and the economic envi- ronment is changing, we need to work with people who have both the desire and the wherewithal to own homes. I'm about making sure that the government doesn't bear the entire burden, but if we soundly open the doors a bit, and work with the private sector, it's done in a way that helps protect the taxpayers, ultimately. I know you were in the industry during the previous financial crash and housing crisis in 2008. What are some parallels you see between then and our current economic and housing landscape? What lessons from that period can and should be applied today? T he biggest difference that we're seeing is that, with the financial crisis in 2008, there were probably seven or eight years that led up to it. It was mostly, in my mind, caused by irresponsible