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24 | TH E M R EP O RT FEATURE A s the United States kicks off 2017 under a new administra- tion, Fannie Mae, Freddie Mac, and the government's conservator- ship of these GSEs have come to the forefront. What is the key to reforming the GSEs, and how can Congress determine the best path forward? MReport recently spoke with housing policy expert Michael Stegman about these questions and more. Michael Stegman is a Fellow for Housing Policy at the Bipartisan Policy Center. In March 2016, Stegman completed a temporary 10-month detail as the National Economic Council's (NEC) top housing policy adviser in the White House for the Obama Administration. Prior to his service with the NEC, Stegman worked for more than three years as the Counselor to the Secretary of the U.S. Department of Treasury for Housing Finance Policy. Before joining Treasury, Stegman was the MacRae Professor of Public Policy, Planning, and Business at the University of North Carolina at Chapel Hill and the Chairman of the Department at Public Policy and founding director of the Center for Community Capitalism. M // What do you think has stalled GSE reform thus far? STEGMAN // There has been a very intensive legislative effort in the last few years. Beginning back in 2012-2013, there have been serious efforts by the administration and Congress to find a bipartisan consensus to end the conservatorships and create a more sustainable mortgage finance system that protects taxpayers and provides broad access to credit for all American families. That legislative effort ended with Johnson-Crapo, a bipartisan bill that was favorably voted out of the Senate Banking Committee in mid-2014. It's what I would call a centrist bill with a majority of moderate Democrats and Republicans supporting the bill and the more conservative Republicans and progressive Democrats voting no for different reasons. The nature of the vote pointed out some of the real challenges of forging a more broadly-based consensus. Among other reasons, the progressive Democrats who voted against Johnson-Crapo didn't think it went far enough to support affordable housing and guarantee broad access to credit for those with less-than-pristine credit who in more normal times, prior to the crisis, were able to get mortgages. On the other hand, several Republicans on the committee who voted "no" thought the bill put the federal government in too prominent a role in the mortgage market and in supporting affordable hous - ing. So, clearly, we've got a way to go in order to forge a broader consensus on how to end the conservatorship and create a secondary market that broadly serves our credit needs today and into the future. I thought it was very important that, in his brief public remarks, Treasury Secretary-designate Mnuchin put GSE reform as a high priority for both Treasury and the new administration. It will take strong and persistent leadership from the top to get housing finance reform done in the next Congress. Johnson-Crapo was really the only bipartisan bill that actually went through a vote. Chairman Jeb Hensarling's PATH Act was voted out of the House Financial Services Committee on a straight party-line basis with no Democrats supporting it. To advance reform, one of the chal - lenges the new administration will face is trying to forge a single voice in the Republican caucus about the role of government in a future housing finance system. Chairman Hensarling's view is that Fannie Mae and Freddie Mac should be put in receivership and not replaced, and, outside of FHA, the federal government should not support the secondary market through a government guarantee. The bipartisan Johnson-Crapo bill provided for a government guaran - tee of mortgage-backed securities, in which most of the mortgage credit risk—except under catastrophic economic conditions—would be taken by private capital. It cut back the government guarantee signifi - cantly from where it is today, but it still maintained a limited guarantee on the grounds that it is necessary to be able to sell mortgage-backed securities to investors in the global marketplace who are unwilling to assume credit risk. Of course, a vi - brant secondary market is essential to help meet the housing needs of American families. A bipartisan majority on the Senate Banking Committee viewed the Johnson-Crapo guar - antee as striking the right balance between no federal backstop and the government taking one hundred percent of the credit risk, Unfortunately, the consensus was not sufficiently broad to win, so this debate about the appropriate role of the government in a future mortgage finance system is still ongoing. M // What is the key to reaching a bipartisan consensus as we move into 2017 and beyond? STEGMAN // It's really too early to say for a number of reasons. There The Road to Reform How can the industry tackle GSE reform in the coming years? One housing expert weighs in. By Brian Honea