TheMReport

TH E M R EP O RT | 61 O R I G I NAT I O N S E R V I C I N G A NA LY T I C S S E C O N DA R Y M A R K E T SECONDARY MARKET THE LATEST Lawmakers Won't Give Up on GSE Reform HR 5505 will now require Treasury secretary to study the impact of GSE conservatorship annually. I t appears GSE reform may actually be on the hori- zon—or at least discussed regularly in Washington— thanks to a new bill proposed by Congressman French Hill (R- Arkansas) recently. The bill, called the HR 5505 GSE Review and Reform Act, would require the U.S Treasury Secretary to study the Federal Housing Finance Agency's con- servatorship of Fannie Mae and Freddie Mac annually, as well as the impact ending that conserva- torship might have. The bill would also require the Treasury to pres- ent recommendations to Congress each year on how to progress GSE reform and move toward ending the conservatorship. Fannie Mae and Freddie Mac have been under FHFA conserva- torship for eight years, when the GSEs required a bailout after the housing market crashed in 2008. Though both Democrats and Republicans have pushed for GSE reform in recent years, Hill says little has been done by Congress to change the conservatorship or even consider a path toward reforming the current system. "There has been no progress toward moving these federally dependent GSEs out of the con - servatorship," Hill said. "My bill would force Treasury to study this issue and present its recom- mendations to Congress at least once a year, creating engagement on the best path forward on housing finance reform to end taxpayer exposure and ensure access to mortgage credit for Americans." GSE reform has been hot in the news lately, with parties on both sides of the aisle making pushes in Congress. In mid-May, 12 right-center organizations wrote a letter urging Congress to pass the Mulvaney Bill, a GSE reform bill sponsored by Rep. Mick Mulvaney (R-South Carolina) that would suspend the GSE's obligation to fund the National Housing Trust Fund and Capital Magnet Fund until they were better capitalized. Not long after that, a group of 32 Democratic House of Representatives members wrote to Treasury Secretary Jack Lew and FHFA Director Mel Watt to demand reassessment of the Preferred Stock Purchase Agreement (PSPA), which requires the GSEs to have a capital buffer of zero by Jan. 1 of next year. This request came on the back of Watt's February speech at the Bipartisan Policy Center, during which he proclaimed the GSEs' capital buffer as one of the biggest risks of conservatorship to date. unprecedented liquidity provided by the U.S. Treasury Department and Federal Reserve to Fannie Mae and Freddie Mac. No bor - rower should face arbitrarily high prices for mortgage credit, especially when the burden is felt particularly hard by low- and moderate-income and first-time homebuyers. We therefore re - quest that FHFA direct the GSEs to reduce or eliminate LLPAs going forward," according to the letter. Among the groups signing the letter were National Association of Realtors, National Association of Home Builders, Credit Union National Association, Center for Responsible Lending, National Association of Federal Credit Unions, National Association of Real Estate Brokers, American Land Title Association, and U.S. Mortgage Insurers. "Housing credit remains too tight and too many qualified borrowers are unable to get access to affordable mortgage credit, in large part because the GSEs are still charging LLPAs eight years after the financial crisis," said Lindsey Johnson, USMI President and Executive Director. "Low down- payment borrowers are being double-charged for the risk being assumed by private mortgage insurance (MI). These additional fees are particularly burdensome for low- and moderate-income and first-time homebuyers. It's time borrowers get the full ben - efit of the credit risk transferred away from the GSEs to private capital in the form of MI." The groups noted in the letter, "Eight years after the financial crisis, mortgage credit qual - ity has improved dramatically and regulations have improved the industries [sic] risk man - agement practices. We believe these changes justify eliminating LLPAs. Our organizations and members appreciate the oppor - tunity to raise this important issue so closely tied to expanding homeownership for millions of Americans." An FHFA spokesperson told MReport, "We have received the letter and will respond." "My bill would force Treasury to study this issue and present its recommendations to Congress at least once a year, creating engagement on the best path forward on housing finance reform to end taxpayer exposure and ensure access to mortgage credit for Americans." —Jack Lew, Treasury Secretary

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