The National Association of REALTORS® is offering answers to questions regarding the Trump administration's release of proposals to reform the housing finance system and end the conservatorship of Fannie Mae and Freddie Mac (GSEs).
How does GSE reform affect my business as a REALTOR®?
- Can you imagine going to the closing table and realizing your client is unable to obtain the financing on which they are relying?
- The GSEs enable financing for the vast majority of middle class America.
- They funnel money from around the world into the U.S. housing market and, in doing so, greatly lower costs for all consumers.
- They also make sure that credit worthy homebuyers in large, small and underserved communities from coast to coast, in good times and bad, have access to safe, quality, affordable mortgages.
How will the housing market be impacted by this proposal in the months ahead?
- NAR does not expect the administration will take any immediate or radical actions to overhaul the GSEs, and therefore we do not anticipate any significant resulting movement within America's economic markets.
- The bulk of these proposals have been discussed in Washington for years, particularly since President Trump made GSE reform a focus of his presidency.
- The administration is likely to begin allowing the GSEs to retain their profits as capital, an essential piece for any insurance company, which is what the GSEs ultimately are.
- Building capital is one step of many in the long, ongoing process to secure GSE reform that will put our housing finance system in position to serve aspiring homebuyers and the housing market in the decades ahead.
Do you anticipate any changes to the 30-year mortgage or to interest rates?
- Economic conditions are critical in a presidential election year, so the Trump administration will likely avoid any moves that could disrupt the housing market or the economy, particularly any change that could jeopardize something as universally popular as the 30-year fixed-rate mortgage.
- Furthermore, the Treasury Secretary and director of the Federal Housing Finance Agency made it clear that they intend to preserve the 30-year fixed rate mortgage and a limited government guarantee.
What are the next steps in GSE reform?
- Fannie Mae and Freddie Mac have spent 11 years in conservatorship. They have been heavily reformed and refocused to support the nation's housing finance system and to prevent another crisis.
- This process has taken years already and will take even more to complete correctly and responsibly
- The administration will begin to examine a number of potential reforms, but several key pieces of a fully reformed housing finance system can only be executed by Congress.
- Thus, the administration's plan provides important mile markers, but it will need to work with the Senate and House of Representatives to complete true system reform
How does this plan compare to NAR's blueprint for GSE reform?
- The White House, as we have long expected, continues to aim to reduce the federal footprint in the U.S. housing market. That includes potential reforms to second home sales, vacation homes and with lender limits policies, although Congressional action would also be needed in order for any changes to be made there.
- They would also like to increase Fannie and Freddie's competition with new GSEs. However, based on research from top academic and Wall Street experts, NAR is concerned that this untested method of adding only a handful of new GSEs would reduce competition and result is less access and higher costs for consumers.
- NAR has its own proposal to transition the GSEs into privately owned utilities that would maintain a public mission and be overseen by a robust regulator. This vision builds on today's heavily reformed GSEs to highlight competition, protect taxpayers and remedy the failures of the pre-crisis system while ensuring equal access for responsible, creditworthy Americans in every corner of this country.
How does NAR plan to maintain its involvement in this process going forward?
- In March, the White House said that sustainable homeownership is the "benchmark of success" for reform, a position which NAR and its 1.3 million members support fully
- HUD and Treasury sought NAR's input for its report over recent months, and NAR's staff shared opportunities for improvement and points of concern with the administration at every turn.
- We look forward to reviewing the proposal in more detail and are optimistic that, at a minimum, the administration's efforts will shed light on the remaining mile markers on the path to reform.
- However, we remain concerned that ill-conceived reform could increase costs and limit access for responsible, mortgage ready Americans while we maintain our belief that NAR's utility model represents the best path forward for this system and for our economy as a whole.
- That is why, in the months and years ahead, we will continue pursuing our utility model proposal while working to ensure the American Dream of homeownership is available to aspiring buyers in every market in the country.