The Republican Party wrapped up its convention in Cleveland a short time ago, nominating Donald Trump as its candidate for President. The Democrats followed the Republicans, nominating Hillary Clinton as their candidate for President at their Philadelphia convention. Because conventions are intended to unify and mobilize supporters behind a candidate, political parties author “platforms” to assert and discuss common principles and policies. So, what do the Republican and Democratic party platforms say about housing and housing finance reform? And will they make a difference when it comes to housing finance reform?

The Republican Platform

The Republican platform is 66 pages long and includes a section on “Responsible Homeownership and Rental Opportunities.” The platform espouses the virtues of a property-owning democracy that safeguards individual liberties, strengthens communities and builds wealth – and blames Democratic housing policies for the housing bust and ongoing conservatorship of Fannie Mae and Freddie Mac.

The Republican platform offers five interesting thoughts on housing policy:

1. The concept of “responsible homeownership” seems consistent with much of the Dodd-Frank Act efforts to create prudential standards for mortgage underwriting, but Republican antipathy to Dodd-Frank has led to an alternative approach centered around lender-initiated efforts and borrower behavior, rather than what the Consumer Financial Protection Bureau (CFPB) dictates.

2. The platform acknowledges supply-side constraints as well, and includes recommendations to reduce restrictions that limit the ability of new construction to keep up with demand.

3. The platform expresses frustration with the lengthy conservatorship of Fannie Mae and Freddie Mac, but encourages the examination of their roles, marking a change from prior Republican calls to wind down the entities.

4. The platform criticizes the Federal Housing Administration (FHA) for operating outside of its mission footprint and losing money, and recommends income limits on FHA activities.

5. Finally, the platform mentions (but does not discuss) renting, within the context of eliminating restrictions to promote greater supply of rental opportunities.

The Democratic Platform

The Democratic platform is shorter than the Republican Party’s platform at 51 pages, but is equally full of position statements and policy recommendations. Because the incumbent administration is a Democratic one, there is no criticism of current housing policy, although the Democratic platform does share a strong commitment to encouraging homeownership with the Republican platform.

However, the Democratic platform differs in one significant respect from its Republican counterpart. The platform avoids any commitment to structural housing finance reform or review of any federal housing programs. In that respect, the platform retreats from the Obama administration’s framework for housing finance reform by emphasizing borrower outcomes instead. If anything, the scope of recommended government involvement is increased, not decreased. Missing is any discussion regarding the roles of Fannie Mae and Freddie Mac, or efforts to promote greater use of private capital to reduce taxpayer risk.

Rather, the Democratic platform has two emphases:

1. The platform defends the post-crisis policy framework created by Dodd-Frank, and commits to resisting any rollback of related legislative or regulatory provisions.

2. The platform acknowledges the continuing struggles of homeowners and renters harmed by the housing bust, and commits to expanding access to affordable housing and homeownership.

People, Priorities and the Prospects for Reform

The Democratic platform states “personnel is policy.” The extent to which housing reform platform statements eventually become legislative or regulatory reality will depend on who is put in charge of housing policy, and whether an issue as large and complex as comprehensive housing finance reform will make the new administration’s list of top priorities. Although housing policymakers routinely decry current housing finance arrangements as “unsustainable,” there has been little discussion by the presidential candidates regarding housing finance reform.

To date, Donald Trump has not offered a position on housing finance reform, which is surprising given his extensive experience as a developer and his father’s history as large-scale residential builder. The Republican platform gives him the flexibility to move in a number of directions on housing finance reform, and his populist leanings suggest that he will not be led by strong ideological convictions regarding private and public sectors and roles.

Consistent with the Democratic platform, she has emphasized desired outcomes rather than institutional reform. However, it is likely that the Clinton campaign is developing policy options for housing finance reform to be ready if housing finance reform becomes a higher priority in the future. And, given her pragmatic tendencies to improve what already exists, we can expect remodeling rather than new construction.

So will the party conventions and platforms make any difference for housing finance reform?  Probably not — yet. Fundamental reforms tend to be crisis-driven, and thankfully none appears imminent in the U.S. residential housing market. It is unclear whether one party will control Congress and the presidency, and even then the complexity of housing finance reform would ensure a lively debate among stakeholders regarding the best path forward. For now, the quiet period can be used to develop, debate and refine reform approaches without the high-stakes urgency that sometimes precludes thoughtful treatment of the issues. Here’s hoping that Congress and the new administration will recommit to a process that results in a sustainable foundation for housing finance and reenergizes the historical bipartisan support for homeownership.

What’s your take on the presidential candidates and Housing Finance Reform? Share in the comments.

Eric Klopfer

Eric Klopfer - MGIC VP Corporate Strategy

Eric Klopfer has been with MGIC for 8 years and is currently the Vice President for Corporate Strategy. Market, legislative, and regulatory changes regarding residential mortgage lending have been dramatic in recent years, and much work remains unfinished. Eric works with his colleagues to make sense of these developments for MGIC and its customers, and to suggest additional changes to policymakers to secure homeownership opportunities on a stable footing for ordinary borrowers within the U.S. housing finance system.

Eric brings to his role extensive experience in mortgage markets outside the U.S., having worked to develop mortgage insurance and mortgage lending businesses in Europe, Asia, and North America.

Eric earned his DPhil in Modern History from the University of Oxford, a JD from Yale University, and a BA/MA in History from the University of Pittsburgh. He lives in Raleigh, where he enjoys running and shoveling less snow than his MGIC colleagues in Milwaukee

Tags: , , , ,