PROJECTHousing Finance Reform Incubator

Laurie Goodman: A New Forum for Fresh Thinking on Housing Finance Reform
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Eight years after Fannie Mae and Freddie Mac were placed into conservatorship, the conversation about their future is stuck. As we inch closer to electing a new president and to the start of a new Congress, it is time for an open-minded look at the housing finance system and what role, if any, today’s government-sponsored enterprises (GSEs) might play in the future.

To help evaluate this critical issue, the Urban Institute’s Housing Finance Policy Center is releasing a series of short essays about the future of housing finance reform.

Since the early days of conservatorship, home values have recovered in many communities, but others are still reeling from foreclosures. Speculation about the impact of the Dodd–Frank Wall Street Reform and Consumer Protection Act has shifted to understanding and observation. The private-label securities market remains stagnant, and portfolio lending’s growth is limited. Early experiences with the GSEs’ limited risk-sharing efforts raise new questions, even as they answer others. And, perhaps most importantly, the shifting national demographics have broad implications for the nation’s housing needs. Minority and senior households are on the rise, and the national homeownership rate is declining.

With all of these changes and uncertainties, one thing remains clear: Perpetual conservatorship is not sustainable. Mel Watt, director of the agency overseeing the conservatorship, recently reminded policymakers of this and called on Congress to “engage in the work of thoughtful housing reform.” While the Federal Housing Finance Agency has taken significant steps to keep the current system working and prepare for the future, we agree with Director Watt that the longer we remain in the current holding pattern, the greater the risk to taxpayers and the housing finance system.

Urban Institute researchers are not abandoning the discussion. We have offered our ideas about housing finance reform in the past and will continue to participate in the discussion. The Housing Finance Reform Incubator is a forum for thoughtful people outside of the Housing Finance Policy Center to join us in open dialogue and to learn from listening to each other. We have invited several voices to offer their best ideas for a path forward.

Over the next two months, we will publish essays in which each author describes how a housing finance system might look postconservatorship and explains how we could get there. We will also ask each author to address how the system will serve underserved communities and households. Beyond that, the door is wide open. These essays will be followed by a policy debate among the authors and others. By bringing thoughtful voices together in a single forum, we hope to expand the debate and pave the way for new ideas.

The following individuals have agreed to contribute inaugural essays for the series:

  1. Jim Millstein, chief executive officer, Millstein & Co.; former chief restructuring officer, US Department of the Treasury
  2. Tim Howard, former vice chairman and chief financial officer, Fannie Mae
  3. Alex J. Pollock, distinguished senior fellow, R Street Institute; former president and chief executive officer, Federal Home Loan Bank of Chicago
  4. Mark Zandi, chief economist, Moody’s Analytics
  5. Patricia Mosser, senior research scholar and senior fellow, School of International and Public Affairs, Columbia University; former head of research and analysis, Office of Financial Research, US Department of the Treasury
  6. Marc Morial, president, National Urban League
  7. Jim Carr, Coleman A. Young endowed chair and professor in urban affairs, Wayne State University;  visiting fellow, Roosevelt Institute; former senior fellow, Center for American Progress
  8. Mark Calabria, director of financial regulation studies, Cato Institute; former senior staff member, Senate Committee on Banking, Housing, and Urban Affairs
  9. Andy Davidson, president, Andrew Davidson & Co. Inc.

We look forward to a compelling and game-changing discussion.

You can follow the Housing Finance Reform Incubator here (link to landing page), get updates from @MortgageLaurie on Twitter, and sign up here to get our bimonthly newsletter with links to all the new work.

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A photo of Laurie Goodman. Dark hair, glasses, bright smile.
"It is time for an open-minded look at the housing finance system and what role, if any, today’s government-sponsored enterprises might play in the future."
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Tim Howard
"When invented narrative is replaced with verifiable fact, Fannie and Freddie cease to be a 'failed business model' that must be wound down and replaced; they instead become valuable resources that must be built upon and improved."
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A photo of Jim Millstein. White hair, slight smile, suit and tie.
"To address the conflict between their affordability mission and shareholder returns, the mortgage guaranty businesses should be subjected to utility-like regulation, with strict activity, leverage, and return on equity limitations."
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A photo of Alex Pollock. Slight smile, suit and tie.
"At the 10% Moment, Congress should declare the senior preferred stock fully retired, as in financial substance it will have been. Simultaneously, Congress should formally designate Fannie and Freddie as systematically important financial institutions.
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A photo of Mark Zandi. Slight smile, suit, brown hair.
"A group of us has put forward a reform proposal that addresses the system's structural problems and keeps what works."
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A photo of James Carr. Severe smile, suit, dark hair.
"The basic pillars of America’s housing finance system were enacted 80 years ago. Since then, major reconfigurations in our economy, demographic composition, and household locational preferences demand a bolder vision for housing finance in the 21st century."
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A photo of Andrew Davidson. Slgiht smile, greying hair, glasses.
"A realistic approach to GSE reform is to strip the GSEs down to the functions that promote standardization, liquidity, and access to credit, and adopt the best governance structures for those functions. This can be achieved in four steps: streamline, share risk, wrap, and mutualize."
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A photo of Mark Calabria. Slight smile, suit, dark hair, glasses.
“Mortgages, under any system, have to rest on someone’s balance sheet. Like water running downhill, the risk has flowed to the most leveraged sectors of our financial system. This is a recipe for instability.”
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A photo of Patricia Mosser. Dark hair, glasses, bright smile.
“The characteristics of mutuals that may be seen as disadvantages for some types of financial companies are in fact advantages for our financial market utility proposal because they align the utility’s incentives with other actors in the securitization chain.”
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A photo of Marc Morial. Big smile, suit, dark hair.
“In the aftermath of the Great Recession, the tragic loss of wealth, and the bailout of the big banks, our national government must continue to play a central role in the housing market to right previous wrongs, ensure access to all qualified borrowers, and keep the housing finance system afloat ...
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A photo of Laurie Goodman. Dark hair, glasses, bright smile.
"Between now and 2030, this country will face an unprecedented surge in rental housing demand. Already, rents are skyrocketing out of the reach for many families, especially in places with job opportunities. New multifamily housing construction is at its highest level since the 1986 Tax Refo...
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A photo of three individuals. All three are smiling, have suits, ties, and dark hair.
"There will be nuanced demands coming from the high concentration of household formation in African American, Asian, and Hispanic communities. Ginnie Mae 2.0 looks to be the safest way to build a sustainable platform to bring proven market stability to meet the needs of a materially changing demo...
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A photo of two individuals. Both are smiling, have suits, ties, and glasses.
“The most critical need for multifamily is simply that policymakers pay attention to it early and plan ahead.
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A photo of two individuals. Both are smiling, have suits, ties, and glasses.
We propose a spinoff of the multifamily business units of the GSEs and the formation of other new guarantors to increase access to affordable multifamily financing.
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A photo of two individuals. Both are smiling, have suits, and ties.
"Consensus exists that a reformed housing finance system must protect taxpayers, emphasize the private markets, support a broad variety of housing options and remain liquid throughout an economic cycle. Surprisingly, few recognize that a proven model already exists that meets those objectives-and...
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A photo of Jim Millstein outside. Dark hair, big smile, suit and tie, glasses.
"Mortgage finance reform discussions have failed to generate consensus assuring the widest possible access to sustainable mortgage credit at the lowest practical cost. We can resolve this impasse if we integrate all federal supports for mortgage finance into one cohesive whole."
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A photo of Pinto. White hair, glasses, slight smile, suit.
"Today’s government-centric housing finance system is an “economics free zone” indifferent to supply and demand. Composed of an alphabet soup of agencies, this system has fostered a massive liberalization of mortgage terms and provided countless trillions of dollars in lending. Yet housing has be...
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A photo of Taylor. White hair, suit.
"Much of the conversation on Capitol Hill and among policy thinkers has pushed affordability and access to the back burner. We need to bring it to the forefront of the conversation. The shape and quality of housing finance reform will have repercussions in every neighborhood and community and for...
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Mike Calhoun and Sarah Wolff
"Average price estimates obscure significant variation. To assess access and affordability, we need to look closely at differential prices, not just overall prices or prices for low–credit risk profiles."
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Rodrigo Lopez and Debra Still
"We believe that all housing needs, from the most directly-subsidized, affordable rental housing to the prime jumbo single-family lending market, lie along a single continuum. This housing continuum can be best served only by addressing single-family and multifamily, rental and homeownership, gov...
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Janet Murguía
"By 2020 half of all first-time homebuyers will be Latino. Without affordable access to credit for these prospective buyers, the housing market will decline, with harmful consequences on the larger economy."
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Jim Parrott
"Coming out of the crisis, there was thus almost universal agreement that we should reduce our reliance on this duopoly and shift more risk into a competitive private market."
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row of houses rendering
Research Areas Housing finance
Policy Centers Housing Finance Policy Center