Waters Second Panel Discussion on GSE Reform -- Industry Perspective

Video Description

A Way Forward for Housing Finance Reform: Finding Sustainable Solutions to Ensure Access, Affordability, and Taxpayer Protection Opening Remarks of the Hon. Maxine Waters (CA-43) Good morning. As the Ranking Member of the Financial Services Committee, I am very pleased to welcome all of you to the second in a series of bipartisan panel briefings I'm organizing during the 113th Congress to discuss emerging issues in housing and financial services. As I mentioned at the last panel in April, I hosted three of these panels during the last Congress and found the interaction between the panelists, the Members in attendance, and the audience to be a very good compliment to the work we do more formally in the Committee. This type of setting allows for a more conversational dialogue to occur, and it can help inform us as we engage in Committee hearings and mark-ups. I convened this discussion today because I believe it is essential for the Congress to move forward and consider housing finance reform proposals. Now is the time to set the foundation for a new housing finance system that ensures access and affordability, while also protecting taxpayers. As everyone here today knows, reform is particularly ripe for discussion now that the stabilization of the housing market is really taking shape. After receiving about $187 billion in taxpayer support following their entry into conservatorship in 2008, Fannie Mae and Freddie Mac are once again profitable. Together, they will have paid the Treasury Department about $132 billion in dividends by the end of June. At the same time, Director DeMarco is taking aggressive steps to shrink the footprint of the Enterprises and use his administrative authority at the Federal Housing Finance Agency (FHFA) to engage in under-the-radar housing finance reform. This includes everything from the joint securitization infrastructure that FHFA is facilitating, to the Servicing Alignment Initiative, reducing the GSEs footprint in multifamily housing, to the Enterprises launching risk-sharing transactions that will try to gauge the private market's appetite for mortgage credit risk. While the Director is quietly pursuing these reforms, we're also seeing a number of other policy changes take shape that will leave a lasting imprint on our mortgage markets. As home prices stabilize and the economy recovers, the Federal Reserve has indicated it is willing to reduce its support for mortgages, which helped send interest rates up significantly in just the last month. The Administration has taken aggressive steps to shore-up the insurance fund of the Federal Housing Administration (FHA), though I think we all acknowledge that legislative reform is also needed. The Consumer Financial Protection Bureau is completing their mortgage rules under Dodd-Frank, trying to balance concerns about access to credit with a desire to prevent the types of predatory lending that led to the 2008 crisis. And our banking regulators may finalize Basel III next month, trying to sort out how various categories of mortgage loans will be treated for capital purposes. Just this week, we saw substantial movement forward on housing finance reform, with Senators Corker and Warner introducing a bipartisan reform proposal to wind-down Fannie Mae and Freddie Mac, and replace them with a government re-insurance company that provides a catastrophic guarantee on mortgage-backed securities. I hope to discuss this proposal and others more thoroughly during today's panel. And of course, we saw my colleague and dear friend, Congressman Mel Watt, perform spectacularly at his nomination hearing before the Senate Banking Committee. I hope that the Senate moves forward quickly to confirm Congressman Watt to that position. So with that said, I am very much interested to hear from the industry participants we have here today about their perspectives on reform. At our last panel discussion, we heard about proposals to create new, chartered mortgage institutions that would sell credit insurance on qualified mortgage-backed securities; we heard about a plan to allow the GSEs to recapitalize through retained earnings; and we heard about a plan that would have a new Public Guarantor sell a limited government guarantee for the single and multi-family markets. This last structure is very similar to the Corker-Warner proposal unveiled this week, and I'm curious to hear the panelists' thoughts on it now that it has been fleshed out in legislative text. I hope that we can have a robust discussion, and one that gives more perspective on the various approaches that have been floated by both Members of Congress and outside stakeholders. Creating a stable and liquid housing finance system that provides certainty to market participants is crucial to the health of the American economy, and should be a top priority of the Financial Services Committee.