Yesterday Senate Democrats sent a joint letter to both US Secretary of the Treasury Steve Mnuchin and Director of the Federal Housing Finance Agency Mark Calabria regarding GSE reform questions and concerns.
The letter was thoughtful and timely, considering the pace of activity from the FHFA and Treasury in an effort to accomplish GSE release from conservatorship, and concerns being raised by housing advocates, affordable lending groups, and some lenders.
The letter states, “As housing finance reform discussions continue we believe it is critical to maintain a system that provides certainty for borrowers, lenders, investors, and renters.”
The letter clearly points to concerns about shrinking the footprint of GSEs, support for affordable lending, and the pace of change. There are pointed questions about modifications to the PSPA (Preferred Stock Purchase Agreements), whether a release would occur before appropriate capital levels are reached, whether a “duty to serve” would exist and more. It asks a specific question about a consent order, something that might lock in reform desires of the current administration in a political regime change in the Senate, the White House, or both.
It’s a good letter and worth the read.
My view: in the event of a regime change, this reform process likely gets stalled wherever it stands at the point of transition leaving it critically important to the current administration to accomplish as much as possible in a short time frame. This pace may expose industry and stakeholders to a higher degree of disruption risk should the pace of change include steps that might impact investors views of the guaranty or impact the footprint in a manner that may adversely hit smaller lenders or affordable lending concerns.
David H. Stevens, CMB, is former SVP of Single Family at Freddie Mac, former EVP at Wells Fargo Home Mortgage, former President and COO of the Long and Foster Realty Companies, former Assistant Secretary of Housing and FHA Commissioner, former CEO of the Mortgage Bankers Association.