According to a June 17 press release from the National Housing Conference (NHC), a new report from the Conference outlines conditions for administrative release from the long-standing conservatorship of Fannie Mae and Freddie Mac (the Enterprises) and provides a clear vision for the future of the housing finance system.
Published by the NHC after consultations with over 100 leading policy experts and stakeholders, “Moving Forward: Administrative recapitalization and release from conservatorship for Fannie Mae and Freddie Mac,” outlines a comprehensive, non-partisan path to resolve the status of the Enterprises and establish a stable, equitable, and market-driven future for U.S. housing finance.
“Ending the conservatorship of Fannie Mae and Freddie Mac is the last major piece of unfinished business from the financial crisis [of 2008-09],” said NHC President and CEO David Dworkin. “After 16 years of limbo, the time has come to move beyond conservatorship with a transparent, thoughtful, and nonpartisan plan that addresses the remaining systemic flaws while preserving the vital mission of ensuring access to mortgage credit across the country.”
The report states that any movement out of conservatorship, along with any subsequent reforms, must guarantee the following aspects of the status quo:
Maintain and enhance mortgage funding liquidity for single-family and multifamily mortgages, including a robust and efficient To-Be-Announced (TBA) market;
Ensure broad, reliable, safe and sound access to affordable mortgage credit for the most consumers possible as statutorily required in the Housing and Economic Recovery Act of 2008 (HERA);
Maintain strong, independent regulation to ensure the Enterprises are safe and sound while preserving a level playing field for lenders of all sizes; and
Mitigate any adverse market and consumer impacts with a smooth, transparent transition.
According to the report, “The transition out of conservatorship should be deliberate, transparent, and supportive of the affordable housing market, leveraging existing regulatory authorities where possible and engaging stakeholders across the housing ecosystem.” One key element of a successful exit from conservatorship is the return to independent board governance with a fiduciary responsibility to shareholders. “Without an independent Board of Directors with fiduciary responsibility to the shareholders,” the report authors note, “the value of shares in a secondary offering would be significantly diluted and potentially eliminated entirely.”
The full report is available at www.nhc.org.
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