FHFA Director Mark Calabria made clear that he is ready to act on ending the conservatorship of the GSEs but called on Congress to act and implored stakeholders to pressure them to do so.
In his prepared speech in New York City, Mark spoke of reform, capital, and the future structure of the GSEs. He was clear on the point that more reforms are needed, saying: “Let me take a moment to make the case for reform – because it’s important that this debate proceed from a shared understanding of why we need reform in the first place, and why we need it now.” He went on to emphasize his view that the institutions are work left unfinished since 2008 and that the status quo is unacceptable.
Mark stated, “The ‘why’ is pretty straightforward. We need to reform our housing finance system because we never really fixed it after the housing collapse more than a decade ago.”
For those wondering what may result from recapitalization and release of the GSEs, Calabria made clear that changes will come with the moves ahead adding: “The federal government’s dominant share of the mortgage industry puts hardworking American taxpayers unfairly at risk. Fannie and Freddie remain ‘too big to fail.’ And while their books of business are in much better shape today, they have grown in size since the crisis.”
Mark leaned into views that sounded very similar to previous attempts in the senate Banking Committee’s efforts to reform the system by creating a multi-guarantor model. “I’m a big believer in competition. History proves that competition works by serving consumers. It lowers prices, improves quality, and drives innovation. And when it comes to housing, competition would make the system more stable. If there were ten GSEs instead of two, it’s unlikely any of them would be “too big to fail,” Mark said.
The concept of a multi Guarantor model was the core construct of the Corker/Warner proposed legislation, the Johnson/Crapo bill that made its way through the Banking Committee with a majority favorable vote, and in the most recent outline proposed by the Banking Committee Chairman, Senator Mike Crapo that resulted in two senate hearings on the subject. This is similar to the proposal that the Mortgage Bankers Association put forth on the subject.
Mark also made clear that he intended to reign in some of the activities of the GSEs. The MBA has long advocated for controls on pilots and market activities that they believed competed with private entities and were not central to their charters and Mark seemed to agree stating, “we are actively reviewing all recent expansions into new markets and activities to put an end to the era of charter creep. Anything that falls outside the GSEs’ core business model and mission will be curtailed or ended altogether.”
Director Calabria cited his close working relationship with Secretary Mnuchin and emphasized their mutual and complimentary skills in mortgage banking, policy, and finance. He ended with a call on industry and stakeholders to push congress to act but made clear that he intends to move forward regardless.
While Mark is clearly focused and determined, the uphill struggles he will likely face in moving the ball forward on full reform will require the force of the Trump Administration and FHFA together and while the timeline may be a challenge, Mark stated his clear recognition that he was not going to be beholden to one, but was certain that he would insure that steps within his authority would move forward at a minimum.
David H. Stevens, CMB, is an Advisor to Mortgage Media. He has held various positions in real estate finance, including serving as SVP of Single Family at Freddie Mac, EVP at Wells Fargo Home Mortgage, President and COO of the Long and Foster Realty Companies, Assistant Secretary of Housing and FHA Commissioner, CEO of the Mortgage Bankers Association.