Economists' Outlook

Housing stats and analysis from NAR's research experts.

Housing Finance Reform [REALTOR® University Speaker Series]

Presentation by Dr. Phillip Swagel, University of Maryland
Summary by Jed Smith, Managing Director, Quantitative Research

The REALTOR® University Brown Bag monthly lecture series features presentations by leading economists, analysts, and social scientists on evolving national and regional issues of interest to REALTORS®. The objective is to highlight a diversity of viewpoints in terms of thought-leadership, recognizing that there will be a variety of possibly conflicting ideas and objectives presented. The talks are for informational purposes and may be at variance with some NAR positions.

Dr. Phillip L. Swagel discussed housing finance reform, proposed plans, the new role(s) that Fannie and Freddie should play, and the importance of protecting access to homeownership. Dr. Swagel is currently a professor focusing on international economic policy at the University of Maryland’s School of Public Policy. He was Assistant Secretary for Economic Policy at the Treasury Department from December 2006 to January 2009 during the financial crisis of the Great Recession. He served as a member of the TARP investment committee, and was responsible for analysis on issues including housing, financial markets, healthcare, pensions, and macroeconomic forecasts.

Dr. Swagel noted that the goals for housing finance reform would be to ensure access to mortgages for credit worthy borrowers; increase the goal of the private sector in allocating capital; and protect taxpayers, the financial system, and the economy. He advocated the creation of a Federal Mortgage Insurance Corporation, which would insure Mortgage Backed Securities (MBS) after the private capital of private insurers was exhausted. Guarantee fees would finance the system, and the FMIC would set standards for mortgages. The proposal would ensure that sufficient high-quality private capital was at risk before the government guarantee took effect, and the FMIC would oversee the single securitization platform and set securitization requirements. He expects that new mortgage backed securities issuers would be encouraged to enter housing finance, with resulting competition and innovation. Mortgage backed securities would be insured though a secondary government backstop on the securities, although the issuers/private firms would not be insured.

His proposals are focused on changing the implicit guarantee on the two GSEs into explicit guarantees on conforming MBS, recognizing taxpayer risk that already exists and allowing the taxpayer exposure to shrink as private capital takes the first-loss risk. Details of Professor Swagel’s plan may be found at

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