PROJECTHousing Finance Reform Incubator

Rodrigo Lopez and Debra Still: Affordable Housing and Access to Credit: Critical Objectives for a New Secondary Mortgage Market

June 7, 2016

Affordable rental housing and access to credit for all qualified homebuyers are the cornerstones of housing in America, and these two commitments must be present in any dialogue about housing finance reform. The policy questions are complex and the politics equally so. Yet, unless these fundamental challenges are resolved in a balanced and effective way, housing finance reform will be incomplete. Moreover, it is time that lenders join in the dialogue with an appropriate level of commitment to these noble aspirations.

To this end, the Mortgage Bankers Association (MBA) recently convened a task force of its members to once again address housing finance reform. Two groups of senior executives, representing a cross-section of single- and multifamily lenders of varying sizes and business models, are meeting to develop both an end-state model and a road map to ensure affordable housing and access to credit issues are sufficiently addressed. Through our discussions with various public interest groups, consumer advocates, and industry experts, we have developed what we believe is a holistic framework for addressing these issues and have outlined some potential solutions.

Housing in America: Mission Critical

A centerpiece of most housing finance reform plans, and consistent with MBA’s reform principles, is the attachment of an explicit federal government guarantee to mortgage-backed securities backed by a limited, defined class of well-underwritten loans. In exchange for this guarantee, secondary market entities should have a corresponding duty to provide access to credit for prospective homebuyers and financing for affordable rental housing. The challenge is how to define and fulfill this obligation in ways that balance the public purposes of the government guarantee with the need to protect taxpayers.

While certain structural and socioeconomic barriers limit the scope and effectiveness of the secondary market in serving affordable housing needs, we believe that a well-designed end state can and must do its part to advance solutions and partner with other stakeholders. Here are our thoughts on some potential approaches.

Framing the Housing Continuum

America’s housing finance system should address the full continuum of households. 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, and government and private capital as parts of a holistic strategy.

Research shows that in the United States, there will be demand for 1.4 to 1.6 million additional housing units each year for the next 10 years (Fisher and Woodwell 2015). Demand for housing will come from households that are increasingly diverse across dimensions such as age, race and ethnicity, and geography. The government-backed secondary mortgage market must be able to provide liquidity to facilitate the development, preservation, or purchase of all types of housing for both owner-occupants and renters. Moreover, government policy should reflect a unified, holistic approach toward addressing the full scope of housing needs along the continuum.

Our continuum framework (figure 1) was developed to provide a single context for integrating the roles of single-family, multifamily, and other programs in serving the housing market writ large. The framework identifies five broad housing market segments across the homeownership and rental markets that policymakers should consider in crafting a holistic housing strategy to meet consumers’ needs. It also identifies some of the federal programs that directly or indirectly affect consumers within the various segments along the continuum.

 The government-guaranteed secondary mortgage market cannot serve the entire continuum by itself. On the affordable rental housing end, the government-guaranteed market can help facilitate financing for the development and preservation of good-quality, affordable rental housing. At the same time, the role of equity investment is also critical, and in some cases, the secondary mortgage market will require partnership with other programs, such as Low Income Housing Tax Credits, Section 8, or the National Housing Trust Fund to serve America’s affordable housing needs.

On the other end of the continuum, the highest-income and highest-credit-quality borrowers are adequately served by the private mortgage sector and do not require the support of a government guarantee.

Importantly, along this continuum lie racial and geographic dimensions, challenges which warrant special consideration. Some of these factors can be addressed through frameworks such as the Community Reinvestment Act or the Federal Housing Finance Agency’s proposed Duty to Serve rule. Others may require collaboration and information-sharing between primary and secondary market participants (including nonprofit organizations), while others bear mentioning but are best addressed in the context of income equality or jobs and economic growth policies.

Serving the Full Continuum

A core objective underlying our support for a government guarantee in the housing finance market is to ensure broad liquidity in all markets and through all economic cycles. The importance of liquidity throughout cycles is common to both the single-family and multifamily mortgage markets. Affordable rental and homeownership policies could be viewed as a means to direct this liquidity toward particular market segments along the continuum. However, to do so, government policy must be crafted as a single, holistic strategy to ensure that programs operate effectively in service to the overall policy. With a unified approach, policymakers can best develop and utilize programs and products to address discrete segments in a unified housing policy.

Preserve and enhance what works. Policymakers’ approach to affordable housing should take into account the differences between, and respective advantages of, the multifamily and single-family markets. The current government-sponsored enterprise (GSE) multifamily businesses should be considered a policy and economic success. Both GSEs’ multifamily businesses have experienced very low default rates, even during the financial crisis, and their predominant business executions have incorporated significant private capital (Mortgage Bankers Association 2015). In addition, because the GSEs do not play the same dominant role in multifamily finance as in single-family finance, there is strong competition among capital sources in apartment finance between banks, life insurance companies, commercial mortgage-backed securities, and other market participants.

Multifamily rental housing tends to be affordable, with rents predominantly affordable to households at or below area median income. The vast majority of the two GSEs' multifamily business is within this range. We believe that the future housing finance system should be focused on ensuring liquidity to the multifamily housing market broadly, with a particular focus on moderate-income and affordable rental housing. Most of the annual cohort of government-backed multifamily activities should finance properties with units affordable to households at or below area median income or some similar standard. We believe that any affordability standards imposed in the context of GSE reform should advance policy objectives to support moderate-income and affordable rental housing and provide flexibility during periods of market disruption and illiquidity.

In the single-family market, the GSEs are, and have been, the dominant liquidity providers, particularly for longer-term (terms of 20 years or more) fixed-rate mortgages. Borrowers currently benefit from this role in two primary ways: first, the GSEs are perceived as being backstopped by the federal government, allowing them to broadly serve the nation’s home purchase needs even through economic downturns; and second, the availability of the TBA (to-be-announced) market for the core of the GSE single-family businesses allows a broad segment of borrowers who obtain financing through conforming loans to receive modestly lower interest rates, saving them money over time. An explicit government guarantee would enhance these benefits and eliminate the risk of market disruption during a regional or national downturn.

As noted above, however, secondary market activities that support the affordable rental housing end of the continuum will need to be complemented by other market mechanisms and clear housing policy. In particular, policies aimed at facilitating development, rehabilitation, and preservation of affordability in the existing housing stock are increasingly important. Adequate quality housing for the lowest-income households and other groups with special needs will require direct-income or place-based support. Such alternative support should work in partnership with flexible debt financing, as in the case of Low Income Housing Tax Credits or the use of Section 8 vouchers to occupants. Such programs should be fully appropriated and funded to meet the needs of households.

Align federal housing regulations and policy missions. To fully serve the needs of the housing market across the entire continuum, federal housing policy should be harmonized into a single, holistic strategy. The at-times competing missions of the Federal Housing Administration, US Department of Veterans Affairs, US Department of Agriculture, Rural Housing Service, Ginnie Mae, and the GSEs should be complementary and coordinated. One approach would be to create or empower a single body to coordinate and manage the various roles and targeted missions. Combining our fragmented housing policy into a single, unified strategy would allow for greater coordination, more dynamic program development, and clear communication with market participants and stakeholders. Moreover, it would help prevent discrete segments of consumers from falling through the cracks as specific policies are developed and executed.

Utilize transparent, pooled pricing and underwriting, where possible. Pricing single-family loan risk at the pool level provides a cross-subsidy that can result in some savings for qualified borrowers while maximizing access to credit. The application of this cross-subsidy and consideration of compensating factors utilized in the underwriting process across various programs and markets should be as transparent as possible to ensure eligibility, qualification, and pricing information can be clearly communicated to the market to improve service.

To protect taxpayers, MBA and its members support additional transparency in the transfer of credit risk to private capital sources. Transparency in the forms and cost at which this risk is transferred to the private sector will help the government manage risk and identify where additional support or research may be necessary. Importantly, risk-based pricing of credit risk by private investors through risk-sharing structures does not preclude the use of pooled pricing of government guarantee fees for borrowers. 

Subsidy contributions. The government guarantee of a well-defined class of single-family and multifamily mortgage-backed securities should be explicitly priced and paid for. This price should include a fee dedicated to funding certain affordable housing–targeted funds, such as the Affordable Housing Trust Fund or Capital Magnet Fund. Entities empowered to grant the government guarantee could also use this fee to work through mortgage originators and other primary market participants (e.g., mortgage insurers or nonprofits) to expand the role of consumer education and mortgage counseling in the housing finance system. These activities are particularly important to assist minority and immigrant households, those burdened by high rents and student debt, and first-time homebuyers so that they may gain from the wealth-building opportunity provided by sustainable homeownership. Additionally, support for affordable housing programs, such as those referenced above, could be supplemented by the fee.


MBA and its members believe that housing finance reform must address and support affordable rental housing, broad access to credit for qualified borrowers, and a commitment to supporting underserved markets. Viewing our national housing needs along a single continuum provides a framework that we believe allows policymakers, industry, and stakeholders to partner together to address our affordable housing objectives in a strategic and sustainable way. The success of housing finance reform will depend on it. 


Fisher, Lynn M. and Jamie Woodwell. 2015. “Housing Demand: Demographics and the Numbers behind the Coming Multi-Million Increase in Households.” Washington, DC: Mortgage Bankers Association.

Mortgage Bankers Association. 2015. “Affordable Rental Housing and Public Policy: Toward Greater Housing Security and Stability.” Washington, DC: Mortgage Bankers Association.

Rodrigo Lopez is executive chairman of NorthMarq Capital Finance LLC, a mortgage banking company dedicated to providing capital solutions for the multifamily industry. He is the chairman-elect of the Mortgage Bankers Association and chairs its Task Force for a Future Secondary Mortgage Market.

Debra W. Still is president and chief executive officer of Pulte Financial Services, which includes Pulte Mortgage LLC, PGP Title, and PCIC Insurance. She was the 2013 chair of the Mortgage Bankers Association (MBA) and is chair of the affordable housing subgroup of the MBA’s Task Force for a Future Secondary Mortgage Market. 


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."
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."
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."
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.
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."
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."
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."
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.”
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.”
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 ...
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...
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...
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.
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.
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...
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."
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...
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...
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."
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...
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."
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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Research Areas Housing finance
Tags Financial stability
Policy Centers Housing Finance Policy Center