The blog of the Urban Institute
January 9, 2014

Senators and researchers agree: now is the time for housing finance reform

January 9, 2014

There is a window of opportunity to begin the long, hard road to reforming the mortgage market, but it may soon close absent action.

That was the consensus of a panel convened yesterday by the Financial Services Roundtable, consisting of Senators Mark Warner (D-VA) and Bob Corker (R-TN), Bipartisan Policy Center’s Rob Couch, and Jim Parrott of the Urban Institute.

There is “relatively remarkable alignment…between administration, key members of the Senate…and many of the key members of industry and consumer groups,” said Parrott, a former a senior advisor with the National Economic Council under the Obama Administration. He argued that if the Senate seizes the moment for reform now, that will either move the House to act or set a strong baseline from which to negotiate in the next Congress.

If we let the moment pass and revisit the issue in the next Congress, he said, the political will for broad, structural reform could diminish as the crisis becomes a more distant memory.

Senator Warner agreed. “My big concern at this point is that the forces of the status quo—‘Hey, it looks like we’ve got a recovery, let’s not mess with anything’—seem to be gathering speed,” he said. “Shame on us if we don’t take advantage of this opportunity” to pass good reform legislation.

What could reform include? According to the panelists, broad, bipartisan support is coalescing around a core set of ideas. A reformed market would place private capital at the center of the market, but retain a catastrophic government guarantee in the event of crisis. It would also ensure broad competition and liquidity, ensure access to credit for low- and moderate-income buyers, all while working to preserve the hallmark of US housing: the 30-year fixed mortgage.

The two primary sources of opposition to this kind of reform will come from opposite extremes, Parrott said: those who want to retain the status quo, including a number of large investors in the shares of Fannie and Freddie; and those who want to go much further and get the government out of the mortgage market altogether, except for targeted support through the FHA.

Photo courtesy of Financial Services Roundtable

Follow Zach McDade on Twitter at @zmcdade


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With QM kicking in tomorrow, I have to wonder IF any changes will be good or bad? Too soon to say how QM will affect housing and whether or not it will actually be good for consumers. I do think changes need to be made to housing finance reform but what changes need to be made? The voices of big money (Wall Street & the banks) will be listened to by the people making the changes. That leads me to wonder IF any of this will wind up helping or hurting the average American?