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GSE Reform Vital for Housing and Economy, NAHB Tells Congress
NAHB Executive Vice President and CEO Jerry Howard on March 6 called on Congress to move quickly to enact comprehensive regulatory reform for housing government sponsored enterprises (GSEs) Fannie Mae, Freddie Mac and the Federal Home Loan Banks that will ensure their financial safety and soundness and allow them to vigorously pursue their housing mission. “At a time when the housing market needs them more than ever, Fannie Mae and Freddie Mac have failed to adequately respond to the mortgage crisis,” Howard told members of the Senate Banking Committee. “Rather than aggressively pursue market solutions, they are hunkering down to shore up financial results and shareholder returns — and are even taking steps that will further burden struggling mortgage borrowers.”
Because their regulator, the Office of Federal Housing Enterprise Oversight (OFHEO), continues to impose a 30% capital surcharge on both companies, Fannie and Freddie are
 attempting to build their capital reserves by imposing higher fees that will raise mortgage borrowing costs at the worst possible time, Howard said. “OFHEO is constraining the ability of Fannie and Freddie to do all they can to promote affordable housing and to help strapped borrowers. At the same time, HUD’s mission oversight over the two GSEs is lacking. HUD should be requiring them to do more, not less, in the present dire mortgage market circumstances,” said Howard. “This just underscores why major reform of this flawed, bifurcated regulatory framework is long overdue and urgently needed.”
During the hearing, Committee Chairman Chris Dodd (D-Conn.) said that significant progress has been made on FHA modernization. A final bill could emerge from a House-Senate conference as early as next week, Dodd said.
In addition, senators noted that GSE reform alone would be insufficient to resolve the current housing crisis and sought input from panelists on other solutions to move housing and the economy forward – including a home buyer tax credit and expanding mortgage revenue bonds. In a spirited exchange with Sen. Bob Corker (R-Tenn.), Howard forcefully stated the need to also allow businesses to carry back net operating losses for five years in order to save jobs and help the home building sector, as well as all businesses, to weather the economic storm. Several senators expressed interest in the tax policy recommendations put forth by NAHB and Chairman Dodd specifically thanked Howard for offering the home builders’ perspective on how to get housing moving again.
In crafting a Senate bill to strengthen the regulatory framework of the GSEs, Howard urged lawmakers to look at H.R. 1427, the Federal Housing Finance Reform Act of 2007, which passed the House last May. This bill would allow the GSEs to operate in a safe and sound manner while preserving the vitality of their government-sponsored status for the fulfillment of their vital housing mission.
Howard outlined NAHB's position on six elements of GSE reform, urging lawmakers to:
- Balance the GSEs’ housing mission with safety and soundness concerns.
- Provide Fannie Mae and Freddie Mac the flexibility to respond promptly, within their charters, to meet market needs.
- Extend the increase of conforming loan limits in high-cost areas.
- Focus and enhance GSE benefits to expand affordable housing opportunities.
- Employ capital as a precise instrument of risk management
- Preserve GSE portfolios as tools for achieving liquidity and their affordable housing mission.
For more information, contact Scott Meyer at 800-368-5242, x8144 or Dave Ledford at x8265.
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OFHEO and HUD Boost Loan Limits
The Office of Federal Housing Enterprise Oversight (OFHEO) on March 6 released the Fannie Mae-Freddie Mac maximum conforming loan limits that will be in effect through year-end as a result of the economic stimulus legislation signed into law last month by President Bush. Seventy-one Metropolitan and Micropolitan Statistical Areas are affected, including 224 counties and cities not in counties. In addition, there are 21 counties outside of Metropolitan or Micropolitan areas that show increases, plus Guam and four municipalities in the Marianas Islands. The newly increased limits range from $417,500 in Greeley, Colo. to the highest of $793,750 in Honolulu, Hawaii. Fannie Mae subsequently announced that it will begin purchasing fixed-rate mortgages at the higher limits effective April 1, and do the same for ARMs starting on May 1. Freddie Mac has not yet announced its effective dates.
In a related development, the Department of Housing and Urban Development on March 5 raised the loan limits for homes insured by the Federal Housing Administration in 14 counties in California. The action was taken after Congress passed its economic stimulus package last month, which includes a temporary increase through year-end on FHA-backed loans, from $362,790 to as high as $729,750. In prepared remarks, HUD Secretary Alphonso Jackson said the new limits will make FHA-backed loans available to as many as 30,000 Californians and 250,000 home owners nationwide.
The following day, HUD announced that it raised the limits in other counties across the nation as well. Overall, the change in loan limits will help provide economic stability to America's communities and give nearly 240,000 additional home owners and home buyers a safer, more affordable mortgage alternative, HUD said in announcing the new loan limits. For more on FHA loan limits in your home area, click here. For additional information, contact Bill Renner at 800-368-5242, x8597.
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Fed Chairman Suggests Reducing Principal on Home Loans
Federal Reserve Chairman Ben Bernanke this week suggested that one way to prevent more distressed borrowers from falling into foreclosure would be for mortgage and other financial companies to reduce the amount of the loan to provide relief to a struggling owner. “Principal reductions that restore some equity for the home owner may be a relatively more effective means of avoiding delinquency and foreclosure,” Bernanke said in a speech to the Independent Community Bankers Association at their annual convention in Orlando, Fla.
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Proposed Regulations Issued for Family and Medical Leave Act
The Department of Labor (DOL) last month issued proposed regulations related to the Family and Medical Leave Act (FMLA). Since its implementation into law, the FMLA has been difficult to interpret and execute, triggering a tremendous amount of litigation, including cases that have reached the Supreme Court. DOL’s proposed FMLA regulations will improve and clarify the existing law with regards to clearing up a confusing and contradictory FMLA regulatory system that, in certain specific instances, makes it difficult for employees to understand and unworkable for employers to administer. All benefits afforded employees under the proposed FMLA remain secure. To read the proposed rule click here. Comments on the rule will be accepted until April 11, 2008. For more information, contact Erin Tario at 800-368-5242, x8413.
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