Gazing out at the large crowd at the Bipartisan Policy Center’s Housing Summit last week, one speaker noted, “I didn’t know there were this many bipartisans in Washington.” Judging by the response to various partisan policy recommendations, though, there were plenty of partisans in the crowd.
Despite the promising bipartisan venue, not surprisingly no new ground was broken on housing finance reform. The focus is very much on the next session of Congress and whether the Senate will be controlled by Democrats or Republicans.
Either way, however, it appears likely that the next chairman of the Senate Banking Committee will be someone who did not support the Johnson-Crapo reform bill (S. 1217). Given the entrenched position of the House Financial Services Committee and the strong positions taken by the Administration during the development of S. 1217, there appears to be a significant possibility that housing finance will have to wait for the next Administration, 2 ½ years from now.
Such a scenario increases the importance of reforms that are brought about outside of Congress. Much expert commentary is urging incremental fixes to debug Dodd-Frank reforms and to use regulations constructively, as my colleague Eric Klopfer suggested last week. Director Watt has made clear that he intends to steer Fannie and Freddie toward a single security and to continue exploring ways to move the credit risk into private hands. The Private Mortgage Insurance (Private MI) industry has been doing what it can with new eligibility standards and revamped master policies. Combined with potential revisions to guaranty fees, these changes could position Private MI to play an expanded role, providing the opportunity to demonstrate the virtues of a housing finance system in which the credit risk is managed by lenders and private mortgage insurers up front, before the loans enter into the securitization process.
This is the time for pilots, experiments, and steady advances so that we will have market-tested suggestions ready for the next big effort at housing finance reform in a few years. The more we do now to prove what works, the stronger voice we will have when Congress turns its attention back to our industry.
Did you attend the Bipartisan Policy Center’s Housing Summit? If so, what was your take on it?Tags: Dodd-Frank, Housing Summit, Johnson-Carpo, Mortgage Industry