Last week, the White House released the U.S. Department of Treasury plan to reform operations of the Government Sponsored Enterprises Fannie Mae and Freddie Mac and the Department of Housing and Urban Development. Although broad in scope and light on details, some recommendations include decreasing the regulatory burdens on private industry mortgage lending, promoting private sector competition, and eliminating the QM patch, which allows Fannie and Freddie exceptions to the rule that mortgage lenders should not provide loans to borrowers whose debt-to-income ratios are over 43 percent.
"We look forward to reviewing the proposal in more detail and are optimistic that, at a minimum, the White House's efforts will shed light on the remaining mile markers on the path to reform, along with the critical role the GSEs and Federal Housing Administration play in America's housing market," said John Smaby, president of the National Association of Realtors, in a statement.
While commending the administration's efforts to come up with a plan to reform operations of the GSEs and the mortgage finance market, Realtor officials expressed concerns on the plan's impact on millions of future homebuyers. The GSEs have spent 11 years in conservatorship and are responsible for a large portion of the $5 trillion home mortgage industry. They have been heavily reformed and refocused to support the nation's housing finance system and to prevent another crisis.
In response to the Treasury Housing Reform plan, California Association of Realtors President Jared Martin released a statement saying, "C.A.R. appreciates the administration's efforts to address the conservatorship of Fannie Mae and Freddie Mac. We have concerns that the proposal will harm high cost areas, such as California, by reducing support for mortgages with higher loan balances. C.A.R. is also concerned about the impact on cities and communities throughout California if support is reduced for vacation homes and mom-and-pop investors."
Alan Barbic, president of the Silicon Valley Association of Realtors, stated, "Silicon Valley continues to exhibit robust economic growth, but it is a high cost area where housing affordability has become a critical issue. We worry that the plan could increase lending costs and limit access for first-time and lower income homebuyers, who are already grappling with the high cost of housing and rent."
In an FAQ on the Treasury Plan, NAR stated the proposal does not represent final, codified law or policy, so NAR does not expect the announcement will immediately change lending or impact the ability of buyers to get a 30-year mortgage. The proposal is one step of many in the long, ongoing process to put the U.S. housing finance system in position to serve aspiring homebuyers and the housing market. Since economic conditions are critical in a presidential election year, the administration will likely avoid any moves that could disrupt the housing market or the economy, particularly one that could jeopardize the 30-year fixed-rate mortgage, which is universally popular.
NAR noted several key parts of a fully reformed housing finance system can only be accomplished by Congress. The administration's plan will need to work with Congress to complete true reform of the system.
"NAR continues working with the White House and Congress as we move closer to securing palatable, pragmatic improvements to our housing finance system, and we maintain our belief that NAR's blueprint for GSE reform represents the best path forward for this system and our economy. Our proposed utility model, as any successful reforms must, highlights competition, protects taxpayers and remedies the failures of the pre-crisis system while ensuring equal access for responsible, mortgage-ready Americans in every market, safeguarding the role the GSEs were intended to play in our housing market," said Smaby.
The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.
The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.
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