Earlier this week, Michael Stegman, counselor to the Treasury Secretary for housing finance policy, spoke about the unresolved challenge of reforming our mortgage finance system, particularly Fannie Mae and Freddie Mac. In his remarks, he offered hope for those committed to a future mortgage finance system that broadens affordable rental and homeownership opportunity while protecting American taxpayers. He also identified the lack of cohesion among competing interests as a barrier to moving forward.
Stegman laid out five principles to guide a new mortgage finance system that go a little bit beyond the three options paper Treasury offered up two years ago and signaling a stronger commitment to an ongoing federal role. They’re concise and worth quoting (as reported by Nick Timiraos of the Wall Street Journal):
- Private capital should “bear the primary burden for credit losses” and taxpayers should be “strongly protected.”
- Households should have access to “sustainable mortgage credit, which must include long-term fixed rate mortgages.”
- The government should promote counter-cyclical lending—that is, markets that provide credit even during periods of severe stress.
- Borrowers in all communities, and across the income spectrum, must be served.
- Any housing-finance overhaul must also address the needs of renters.
These align well with the principles NHC put forward (see the broad principles and the multifamily principles) even longer ago than the Treasury paper. So there’s hope that we will eventually see movement toward a new and better housing finance system. But Stegman also highlighted the challenge that competing interests in the mortgage space have not come anywhere near a consensus.
Interest groups demanding that government officials make tough choices is hardly new. Indeed, it’s part of the reason we have government officials in the first place. But we as stakeholders should take Stegman’s observation to heart. It’s in our enlightened self-interest to create mortgage finance system that protects taxpayers from assuming unnecessary risk, strengthens households and neighborhoods in ways that help the overall economy, and creates opportunity for private enterprise to do well by doing good. By being open to compromise and willing to engage constructively with the complex tradeoffs inherent in such a major policy overhaul, we can move closer to our collective goal of safe, decent, and affordable housing for all in America.