WASHINGTON, Dec. 16, 2015 /PRNewswire/ -- Joshua Rosner, Managing Director of Graham Fisher & Co., was joined by several housing finance policy experts Tuesday in calling for recapitalizing Fannie Mae and Freddie Mac as the first step to reforming the secondary mortgage companies.
In a conference call, he announced the release of his paper, "GSE Reform: Something Old, Something New, And Something Borrowed." The paper summarizes the historic role the government sponsored enterprises have played in facilitating homeownership, the policy changes that put the enterprises at the center of the 2007-8 financial crisis and the steps needed to create a better mortgage finance system.
Rosner was joined by Center for Responsible Lending (CRL) President Mike Calhoun; Community Mortgage Lenders of America (CMLA) Executive Director Glen Corso; Independent Community Bankers of America (ICBA) Senior Vice President Ron Haynie; National Community Reinvestment Coalition (NCRC) President and CEO John Taylor and Director of Policy & Government Affairs Gerron Levi; and Community Home Lenders Association (CHLA) Executive Director Scott Olson.
They echoed the view that Fannie and Freddie have played critical roles in promoting access to homeownership and affordable housing for many decades. They agreed that reforms are needed and that the GSEs should be required to build and retain capital. They also opposed actions that could delay reforms, notably the Jumpstart GSE Reform bill, elements of which have been added to an omnibus spending bill Congress is set to vote on by the end of the week. The Jumpstart language only serves to delay necessary reforms and places the public at risk.
Rosner and others dismissed an opinion piece in the New York Times published this week, "Fixing Fannie and Freddie for Good," which asserted that advocates of recapitalizing Fannie Mae and Freddie Mac simply want to "go back to the system we just bailed out." Rosner said it was "intellectually dishonest" to suggest he and others advocated returning to the housing finance system that existed leading up to the financial crisis.
The Housing and Economic Recovery Act of 2008 (HERA) made sweeping oversight changes to Fannie and Freddie and required the GSEs' regulator to return the companies to a "sound and solvent" condition. Rosner said dismantling Fannie and Freddie, as many advocate, is unnecessary and possibly risky, comparing it to building an entirely new automobile assembly plant in response to a minor traffic accident.
Rosner summarized his paper explaining that history has shown the "the best way to serve the public interest is to recapitalize Fannie Mae and Freddie Mac and make certain they perform their historic mission as countercyclical sources of secondary-market capital capable of providing stability to the home finance market." The paper recommends that the Federal Housing Finance Agency (FHFA) should fulfill its Congressionally-given mandate to restore the financial soundness of the GSEs and undertake reforms so that the entities could function in a manner similar to a public utility, sustaining a liquid and stable secondary mortgage market. His paper dispels several false myths that have shaped several GSE reform efforts to date, such as the assumption that private capital can replace what Fannie and Freddie provide the market or that the GSEs need competition in the traditional market sense given their unique role. Among the reforms the paper recommends is making government backstop clearer and more narrowly tailored and Continuing to implement the improved regulatory oversight of the GSEs required by the Housing and Economic Recovery Act of 2008.
An audio replay of the call is available:
SOURCE Graham Fisher