On Tuesday, March 26, 2019, and Wednesday, March 27, 2019, the Senate Banking Committee met to hold hearings entitled “Chairman’s Housing Reform Outline, parts one and two”.
The objective was to hear debate on the path forward for Freddie Mac and Fannie Mae with specific input related to Chairman Crapo’s outline released earlier this year.
The witnesses were:
March 26, 2019
- Ms. Sue Ansel, President and CEO, Gables Residential, on behalf of The National Multifamily Housing Council;
- Mr. Edward J. DeMarco, President, Housing Policy Council;
- Mr. Greg Ugalde, Chairman of the Board, National Association of Home Builders;
- Mr. Mark M. Zandi, Chief Economist, Moody’s Analytics;
- Mr. Hilary O. Shelton, Washington Bureau Director and Senior Vice President for Advocacy and Policy, NAACP; and
- Mr. Adam Levitin, Professor of Law, Georgetown University Law Center.
March 27, 2019
- Mr. Michael Bright, President and CEO, The Structured Finance Industry Group;
- Mr. Robert D. Broeksmit, President and CEO, Mortgage Bankers Association;
- Ms. Lindsey Johnson, President, U.S. Mortgage Insurers;
- Mr. Vince Malta, President Elect, National Association of Realtors;
- Ms. Carrie Hunt, Executive Vice President of Government Affairs and General Counsel, National Association of Federally-Insured Credit Unions; and
- Mr. Michael D. Calhoun, President, Center for Responsible Lending.
While there was debate by some progressives as to a lack of commitment to affordable housing and the risks in transition, and somewhat equal pushback from conservatives questioning the need for this amount of government support in housing. Senator Kennedy went so far as to state they were unnecessary and disruptive. There were many points of consensus as well.
In the first day’s panel, all but one witness was clear in the opposition to recap and release. Economist Mark Zandi stated that this should be the last resort. Ed DeMarco, Mark Zandi, and the witnesses from the home builders and the multi-family housing council all supported Chairman Crapo’s outline, with the NMHC embracing the spin-off provision for the multi-family businesses.
In the second panel, there was some disagreement on the multiple guarantor model, and concerns about whether this model would be obligated to serve all markets and all lenders equitably.
Based on reviewing the testimony and majority views of the panel, the following were some of the key areas of agreement:
- GSE reform is needed with the majority of panelists calling for this. For those that prefer the single or dual utility model over a multiple guarantor model, they still all agreed that “reform needs to come before any recapitalization” as stated by Mike Calhoun from the Center for Responsible Lending. Mark Zandi the Chief Economist for Moody’s Analytics stated the same in the first days panel by remarking “recap and release should be the last thing on the list of options”.
- There is considerable concern among credit unions, realtors, and consumer advocates that a multiple guarantor model might result in “cherry picking” unless the law is clear. As Ranking Member Sherrod Brown (D-Ohio) stated in his final point, “guarantors must serve all markets, must price all lenders equitably, and must have a duty to serve”. Those points resonated throughout both hearings.
- There seems to be a growing frustration among some of the Senators on the Panel about resistance to moving forward after years of attempts at legislation. Senator Warner (D-Virginia) warned about the risk on inaction and potential downside of the administration “taking over” and perhaps stripping away some of the current support. Senator Tester (D-Montana) called for each witness to provide a list of concerns about the proposed plan so that they could be answered.
- Finally Chairman Crapo (R-Idaho) summed up with his view that there seemed to be more alignment on moving forward and while there are still things to be resolved, he heard more agreement for reform over the two days and many points of common alignment.
Clearly this is the beginning of a long process as the committee works to take this outline from Chairman Crapo and turn it into legislative text. It does appear that the committee has a congenial working relationship and perhaps there is some reason for optimism that, at the committee level, legislation might be able to move forward despite the greater challenge of a full senate and house coming to agreement.
As we publish this, there are expectations of a White House release calling for HUD and Treasury to work on a GSE plan. While we await to see what level of detail they might show in this announcement, it is clear that the entire topic of the GSEs is in play and Mortgage Media will be there to report what we become aware of as this progresses.
David H. Stevens, CMB, is Senior Advisor at Mortgage Media, and 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