Tuesday, July 1, 2014

Reading into Treasury’s housing policy announcements

What we're building
by Ethan Handelman, National Housing Conference

Treasury Secretary Jacob Lew’s announcement of new moves in housing policy last week surprised many housing stakeholders, especially those used to HUD’s deliberate telegraphing of moves rather than Treasury’s top-secret-until-announced approach. Upon reflection, each of the policy actions underscores major housing challenges of housing affordability and post-foreclosure neighborhood recovery that Treasury is addressing in a political environment frozen by a partisan divide.

·         Extending Making Home Affordable, which includes HAMP and HARP, shows that Treasury realizes we are in the long tail of the foreclosure wave. There are many homeowners still struggling with underwater or unsustainable mortgages. The HAMP mortgage modification program and the HARP refinancing program have created an industry standard for finding individual solutions that by avoiding foreclosure are better for borrowers, lenders, and neighborhoods.

·         Asking for comment on how to restart the private-label securities (PLS) market for home loans is a reminder that Treasury still wants to crowd in private capital to the mortgage market. We heard that way back in 2012 at the NHC Policy Symposium and once again at this year’s Policy Symposium from Under Secretary Mary John Miller. If Treasury’s planned meetings and the requested comments can shed more light on the persistent resistance of PLS investors, so much the better.

·         Calling for bipartisan housing finance reform shows that Treasury knows our housing finance system is still broken. Too much rides on Fannie Mae, Freddie Mac and the FHA even now, and many potential homeowners can’t obtain loans. As NHC has called for, we need a sustainable reform that provides housing options for homeowners and renters alike, which can only come through bipartisan, outcome-focused housing finance reform.

·         Providing capital for multifamily risk-share transactions through the Federal Financing Bank shows that Treasury knows we have a rental housing affordability crisis. Harvard’s State of the Nation’s Housing just made that point most strongly, and this new pilot action by Treasury could provide additional capital for affordable rental housing. It’s a small but potentially significant step in the right direction, and we’ll know more once the first transaction in New York City closes.

These actions come in a fraught political environment paralyzed by partisan battle. President Obama is explicitly acting in ways that do not require Congress, a course that can move more quickly, but is ultimately limited in reach. While we welcome positive change on housing’s biggest challenges, we also know that only a concerted bipartisan legislative effort can truly get the job done.

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