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What are GSE's and What Do They Mean to You?


NAR testifies on GSE changes that could disrupt the market

WASHINGTON – Jan. 7, 2019 – On Dec. 21, National Association of Realtors® (NAR) President-Elect Vince Malta testified before the U.S. House Financial Services Committee during its hearing, "A Legislative Proposal to Provide for a Sustainable Housing Finance System: The Bipartisan Financing Reform Act of 2018."

The topic focused on government-sponsored enterprises (GSEs) that notably include Fannie Mae and Freddie Mac. The GSEs buy mortgages from lenders, which then use the cash to fund more mortgages. During the recession, the government took over the GSEs, but that put it in a risky position going forward, especially should the U.S. experience another recession.

As a result, Congress has tried – unsuccessfully so far – to plot a way forward that returns some of that mortgage risk to private investors.

Malta, a third-generation Realtor and the CEO and broker of Malta & Co., Inc. in San Francisco, commended the House committee for its work toward comprehensive reform of the nation's housing finance system, and he outlined NAR's priorities for a legislative restructuring of Freddie Mac and Fannie Mae.

In his testimony, Malta outlined NAR's positions on the three main components of Committee Chairman Jeb Hensarling's bill, the Bipartisan Financing Reform Act of 2018.

"NAR believes the discussion draft contains many provisions that should serve as the backbone for comprehensive housing finance reform," Malta said. "These components include an explicit government guarantee, regulatory flexibility and strong and reasonable regulatory authority. However, as the discussion draft evolves, the proposal can be improved to further ensure a reliable and affordable source of mortgage capital is readily available for responsible creditworthy Americans in all types of markets.

"Above all else, NAR firmly believes that comprehensive housing finance reform must be done in a bipartisan manner."

Along with Malta, representatives from the National Association of Home Builders, Mortgage Bankers Association, and the National Association of Federal Credit Unions participates in the Financial Service Committee hearing.

"The National Association of Realtors commends Chairman Hensarling for his hard work in the effort to reform America's housing finance system," said NAR Senior Vice President of Government Affairs Shannon McGahn. "Specifically, we strongly support this proposal's language to provide an explicit government guarantee for mortgage-backed securities, which will provide countercyclical protections and pricing benefits to American consumers. Most importantly, any reforms must provide liquidity and promote stability in the national housing market, particularly during times of economic distress."

Despite structural and fundamental improvements to the housing industry since the financial crisis, NAR has argued that the current government conservatorship of Fannie Mae and Freddie Mac needs to be re-examined. Realtors believe policymakers must address the mounting challenges facing the secondary mortgage market, which could have a severe impact on taxpayers and on Americans' ability to access affordable mortgage credit.

In order to minimize threats, NAR urges Congress to enact comprehensive housing finance reform legislation, which will be the focus of NAR's Policy Forum on Feb. 7, 2019, in Washington D.C. Industry experts, academics and policymakers will speak at the event as NAR seeks sensible reforms for the future.

"While the housing market has generally improved since the financial crisis, there remains a need for policymakers to address challenges that may arise in another economic downturn," Malta said. "Thoughtful reform of the secondary mortgage market will not only safeguard the interests of taxpayers, but also ensure a deep and affordable mortgage market for all creditworthy Americans."

© 2018 Florida Realtors®


Information provided by Florida Realtors.  Click here to see the original article.

Reprinted with permission Florida Realtors. All rights reserved. 

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