Thursday, July 29, 2010

When to Wake the Giants?

After receiving masses of input from the housing and finance industries and the broader public, the administration has announced a conference on August 17th to discuss the future of home loan funds. With Wall Street reform leaving Fannie and Freddie to their own devices, the next challenge in Washington is figuring out how to overhaul the giant government-sponsored enterprises (GSEs), without toppling affordable housing finance as we know it.

The government has taken a careful approach to a January 2011 deadline, imposed by the Wall Street reform law, to propose specific GSE reforms.

The administration has been hinting at shifting housing finance over to the private sector. Whether that means cutting Fannie and Freddie off from government conservatorship completely or just reducing their market share, the transition will need to progress with a steady hand and ginger step. Barry Zigas, a member of NHC’s Executive Committee, is happy with what he’s hearing from administration leaders so far.

Although reform is still a long way off, for a while the administration has been signaling a break from the singular focus on homeownership, and placing more value on rental housing.

The upcoming conference will be the first poke in eventually upending the entire housing finance system. We can only hope the giants wake up on the right side of the bed.

Image: Odysseus, protagonist of Homer’s Odyssey, pulls a fast one on the Cyclops. In coloring picture form via It’ll be up to the gov’t to color between the lines.

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