Fannie Mae (FNMA)

[BaGr]

NAR Principles for Housing Finance Reform
NAR supports restructuring the secondary mortgage market to ensure a reliable and affordable source of
mortgage capital for consumers, in all types of markets, to avoid a major disruption to the nation's economy
that would result from the total collapse of the housing finance sector. Restructuring is required in response
to the failure of Fannie Mae and Freddie Mac, which has been under government control since entering
conservatorship in September 2008.
• An efficient and adequately regulated secondary market is essential to providing affordable
mortgages to consumers. The secondary market, where mortgages are securitized, is an important
and reliable source of capital for lenders and therefore for consumers. Without a secondary market,
mortgage interest rates would be unnecessarily higher and unaffordable for many Americans. In
addition, a poorly functioning secondary market will impede both recovery in housing sector and the
overall economy.
• The old GSE system with private profits and taxpayer loss must be replaced. The current
GSEs (Fannie Mae and Freddie Mac) should be replaced with government-chartered, nonshareholder
owned authority(s) that are subject to sufficient regulations on product, revenue
generation and usage, and retained portfolio practices in a way that ensures they can accomplish their
mission to support long-term mortgage financing and protect the taxpayer.
• Reforms should ensure a strong, efficient financing environment for homeownership and
rental housing. The mission of the new authority(s) must include increasing sustainable
homeownership, providing access to mortgage financing and refinancing for consumers who have
demonstrated the ability to sustain homeownership. Creditworthy consumers require a steady flow of
mortgage funding that, even during economic downturns, will continue to be available as insured by
an explicit government guarantee.
• The government must clearly, and explicitly, offer a guarantee of mortgage instruments
facilitated by the authority(s) that meet the Qualified Mortgage (QM) standards. This is
essential to ensure qualified, creditworthy borrowers have access to affordable mortgage credit.
Without government backing, consumers will pay much higher mortgage interest rates and
mortgages may at times not be readily available at all-as happened in jumbo and commercial real
estate loans. Taxpayer risk would be mitigated through the use of mortgage insurance on loan
products with a loan-to-value ratio higher than 80 percent, or through other fees paid to the
government.
• The new authority(s) should guarantee or insure a wide range of safe, reliable mortgage
products. These mortgage products include 15-year and 30-year fixed rate loans, traditional
adjustable-rate mortgages (ARMs), and other products that have stood the test of time and for which
American homeowners have demonstrated a strong “ability to repay.”
• Provide a self-sufficient mechanism whereby safe, sound, transparent, and insured Mortgage
Backed Securities (MBS) may be packaged and sold. There must be an option for an explicit
government guarantee or insurance for all offered MBS within the secondary mortgage market. The
creation of a not-for-profit “utility(s)” facility is needed to receive, package, sell and guarantee MBS.
The authority(s) should operate with similar insurance and enforcement components as the FDIC.
This option must minimize taxpayer exposure.
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• Sound and sensible underwriting standards must be established. Establish standardized, sound
underwriting principles and products that provide the foundation for responsible, credit worthy
borrowers to be able to achieve homeownership goals. For additional safety, these standards must
also be applied to securities (MBSs), purchased for portfolio (to a limited extent).
• The authority(s) should price loan products or guarantees based on risk. In addition, the new
authority(s) must set standards for the MBS they guarantee that establish transparency and
verifiability for loans within the MBSs.
• Ensure solid, verifiable, current loan level data is available to investors that empowers and
enables them to conduct their own risk analysis. There is a strong consensus among multiple
market participants that solid loan level data is the essential foundation from which to rebuild the
private mortgage security industry. Investors want to be empowered and enabled to conduct their
own analysis. With properly structured loan level data the mortgage collateral supporting a regulated,
securitized instrument will lead to a verifiable, current predictable instrument of cash flow and thus
will attracting private capital.
• The reformed authority(s) must have a separate legal identity from the federal government
but serve a public purpose. Unlike a federal agency, the authority(s) will have considerable political
independence and be self-sustaining given the appropriate structure.
• The new authority(s) should remain politically independent. Political independence of the
authority(s) is mandatory for successful operation. CEOs should have fixed terms so they cannot be
fired without cause, and they should not be allowed to lobby. Additionally, the authority(s) should be
self-funded instead of receiving ongoing appropriations.
• There must be strong oversight of the authority(s). The new authority(s) should be overseen by
the Federal Housing Finance Agency (FHFA) or a successor agency that would make timely reports
to allow for continual evaluation of the authority(s)’ performance.
• Restore investor confidence and trust in the Representations and Warranties via the
standardization of pooling and servicing contracts. Standardization of Representations and
Warranties is imperative. Pooling and Servicing Agreements (PSAs) must be simple with clear terms
and definitions so they are easily understood by investors. They must have clear disclosures of any
deviations from “Federal Best Practice Standards,” clearly define “buy back” rules, and servicer
operational policies must be consistent with their fiduciary duties to the investor.
• The new system must allow for mortgages that are syndicated through explicitly government
guaranteed mortgage-backed securities (MBS) to be assumable. When interest rates rise,
especially in high cost areas, the availability of an assumable low rate mortgage on a property may
become the most affordable source of financing for a qualified assuming buyer

http://www.narfocus.com/billdatabase/clientfiles/172/4/1843.pdf





Realtors®: Fannie Mae, Freddie Mac Conservatorship Takes Center Stage As Next Housing Finance Regime Comes Into Focus
PRESS RELEASE PR Newswire
Nov. 2, 2017, 06:30 PM
WASHINGTON, Nov. 2, 2017 /PRNewswire/ -- Nearly a decade after the federal government took control of Fannie Mae and Freddie Mac through conservatorship, little progress has been made in finalizing housing finance policy that can take the secondary mortgage market beyond the status quo.

Kevin Brown's Testimony

Leaders on the House Financial Services Subcommittee on Housing and Insurance took steps to change that this week with a hearing titled "Sustainable Housing Finance: Private Sector Perspectives on Housing Finance Reform."

Industry leaders, including the National Association of Realtors®, testified at the event. Kevin Brown, chair of NAR's Conventional Financing Committee, told Members of Congress during his testimony that Realtors® have two key objectives in the housing finance reform discussion.

"First, Realtors® want to ensure that in all markets affordable mortgage capital will always remain available for creditworthy Americans," Brown said. "Second, Realtors® believe that taxpayer dollars should be protected."

Fannie Mae and Freddie Mac, both considered "government-sponsored enterprises," are responsible for providing liquidity to lending institutions through a secondary mortgage market, where loans are securitized and sold to investors. This activity affords banks and other lending institutions the liquidity to continue making loans, while incentivizing them to make mortgage products like the 30-year fixed-rate mortgage available to middle-class consumers.

NAR has argued that it is time to move Fannie Mae and Freddie Mac out of conservatorship, which Brown told members of Congress is unsustainable in its current form. Instead, Brown offered a clear vision for a "government-chartered, non-shareholder owned" system that puts its service to homeowners and taxpayers ahead of profits.

"NAR believes this structure, with clearly defined roles and enhanced safeguards, is the best model for the new authorities, because it establishes a separate legal identity from the federal government while serving a public purpose," Brown said. "Unlike a federal agency, government-chartered organizations are established to be politically independent and often are self-sustaining – not requiring appropriations from Congress. The ability of the authorities to focus on their mission, without the need to chase risky profit-driven opportunities, is an important criteria for Realtors®."

As part of the reformed system, Brown outlined some important criteria for success including:

An explicit government guarantee of the new authorities.
Putting profits towards capital reserves to alleviate losses that occur during market fluctuations and economic downturns.
Converting Fannie Mae and Freddie Mac into the new authorities to utilize existing infrastructure and capabilities and minimize market disruption.
The government-chartered authorities are preferable to nationalized or fully privatized systems, Brown said, because they could respond to market downturns effectively, while also minimizing taxpayer exposure to losses. Brown also suggested that the new authorities should utilize a regulated, retained portfolio, which could be tapped during a downturn or to test innovative mortgage products.

In the past, NAR contributed to the conversation on how a new housing finance system work in part through a series of principles on housing finance reform. As talk of housing finance reform heats again on Capitol Hill, Brown made it clear that achieving success is more important than ever.

"The stakes have never been higher for the housing market and the broader economy," he said. "Yet, there are sizeable challenges and risks associated with the ongoing conservatorships of the enterprises. Comprehensive housing finance reform enacted by Congress will help address many of these issues."

The National Association of Realtors®, "The Voice for Real Estate," is America's largest trade association, representing 1.3 million members involved in all aspects of the residential and commercial real estate industries.

http://markets.businessinsider.com/news/stocks/Realtors-Fannie-Mae-Freddie-Mac-Conservatorship-Takes-Center-Stage-As-Next-Housing-Finance-Regime-Comes-Into-Focus-1001848834