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MReport_July2015

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18 | Th e M Rep o RT cover story Ginnie Mae securities, and alters FHA's counter-party risk profile. We must keep in mind that FHA has both a business and a public- policy function: We run a large insurance company and we must do so in a prudent and fiscally responsible manner. Risk-sharing would need to facilitate the mis- sion and truly add value. M // What is FHA's outlook for homeownership levels in the near term? golding // Many variables affect the outlook for homeownership, including the overall economic climate, interest rates, and hous- ing prices. At FHA, we are more focused on reducing unnecessary barriers to homeownership than on predicting market volume or homeownership rates. We want to be sure that qualified borrowers can access credit. For example, the premium reduction was an impor- tant part of our effort to increase access by increasing affordability; it will definitely help open the door of homeownership to responsible borrowers. In fact, over the next three years, we anticipate about 250,000 new homeowners will come into the market as a result of the premium decrease. M // Despite the recession, many Americans still strive to become homeowners. Do you believe the conversation surrounding housing should move away from the assumption that owning is better than renting? golding // Of course housing policy should support both; it is important that people have access to affordable housing regardless of whether they choose to rent or own. As we continue to refine housing policy in response to the crisis, we should not lose sight of the fact that we have a severe short- age of affordable rental housing. Yet, homeownership is associated with many positive benefits. It is a primary source of building wealth, helping people move into the middle class. And owning a home promotes stable communities. Taken together, these factors underscore the importance of preserving homeownership options while working on ways to create more affordable rental housing. M // What is your response to the opinion that the government should move away from supporting housing subsidies? In what ways could housing subsidies bolster the economy? golding // While I think it is always good to assess government programs, we should be careful about how the term 'subsidy' is used. Subsidies can take many forms—homeowners' ability to deduct mortgage interest from their taxable income is a form of subsidy. The support FHA pro- vides to the market can be viewed as a subsidy, as can FDIC deposit insurance. Government supports housing in a wide variety of ways because it is an important part of the economy and because people need places to live. During this most recent crisis, FHA provided an extraordinary level of support. FHA market share rose from approximately 3 percent to 25 percent. Historically, FHA's market share is closer to 10 percent. Economists have noted that housing prices would have fallen more, and that the recession would have substantially wors- ened, without FHA. FHA's impact on the recession really illustrates the important role government plays in housing. And that is the right approach, because housing is a platform for most everything else in our lives—education, em- ployment, and health. M // A main concern for potential homeowners today is saving toward the down payment. Does it make sense for the Administration to come up with a mechanism for saving for a down payment? Would a private account similar to the way that many save for a college education be feasible? golding // I think anything that supports more wealth cre- ation for moderate-income people is positive. So I am open to ideas that help accomplish that goal. Housing prices in some parts of the country are high enough that it is very difficult to save the amount needed for a large down payment, so taking steps that help accumulate wealth would help ad- dress some of those barriers. M // In light of the lessons learned from the housing crisis, what does a responsible housing policy—one that balances expanding access to credit with upholding responsible lending— look like? golding // As long as we remember that making fully documented loans to qualified borrowers did not cause the crisis, developing a balanced policy is very achievable. Through Dodd Frank, we have taken some important regulatory steps, such as defining a qualified mortgage. Given the work we have done to make sure that the poor lending practices, which led to the crisis are not repeated, it is time to focus on access. That is what we have been doing at FHA—clarifying our policies and eliminating ambigu- ity and inconsistency, so lenders know the rules of the road and can more effectively assess expo- sure. Making the effort to develop clear, concise policy is the first step toward encouraging access. M // What role would you like the FHA to continue to play in the housing market? golding // FHA should play the role it has always played: facilitate homeownership for underserved groups. FHA has been an especially important way to access homeown- ership for first-time homebuyers in- cluding many minority families. In addition to helping qualified families purchase a home, FHA plays the countercyclical role of providing liquidity when the private market steps back. The Great Recession provides a good example of how important this role is; economists have noted that without FHA, housing prices might have fallen another 25 percent. So, it is incred- ibly important that FHA is available during economic downturns. "I am pleased that ed Golding was appointed to the position of principal Deputy Assistant Secretary at FhA. ed brings experience and knowledge to the post at a a time of uncertainty, particularly around affordability and funding of MMI. FhA has to convince young America that homeownership is and remains the central component to building personal wealth and financial stability." —Ed Delgado, Five Star Institute president and CEO Ad_MBM_2015-06_OT_BKClients_AreReady_9x10-875.indd "ed Golding is fantastic and I am excited he is taking over from me." —Former FHA Acting Commissioner Biniam Gebre

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