White House Mortgage Finance Reform Memo May Signal Big Changes – Or Not

Any Changes to Mortgage Finance Should Ensure Affordable Credit for All Credit-Worthy Consumers

Washington, D.C. — The White House memorandum on mortgage finance reform published on March 27, 2019 could mark the beginning of major changes in how consumers, lenders and investors access and finance home mortgages, the Consumer Federation of America (CFA) said today.  But how quickly such changes could come, and whether Congress has the appetite or ability to navigate the complex and conflicting interests that have stymied reform for the past 10 years is unclear.

“The White House announcement definitely raises the stakes in this discussion,” said Barry Zigas, CFA’s Director of Housing Policy.  “We are pleased that it endorses some important fundamental principles that CFA and others have promoted for years.  But converting these into actual policy execution remains a big challenge, where the outcome and progress remain uncertain.”

Zigas also noted that any changes in mortgage finance must sustain a commitment to using the federal government’s support to foster affordable credit across the broadest possible range of credit worthy borrowers and communities.  “The US mortgage finance system has shortchanged too many consumers for too long – particularly African-Americans and Latinos, and low- and moderate-income consumers and communities,” Zigas said.  “Any reforms, whether through administrative or congressional action must insure that there is the fullest possible access to affordable and sustainable mortgage credit.”

The White House memo specifically calls for moving Fannie Mae and Freddie Mac, the so-called “GSEs” out of conservatorship, under which they have operated since 2008.  There has been strong congressional opposition in the past to restoring the two companies to their pre-crisis status and administrative actions potentially contemplated in the memo could face significant pushback.

“America’s consumers need a stable mortgage finance system that assures access to affordable, responsible credit for the largest purchase they will make in their lifetimes,” Zigas noted.  “Lenders and investors also need a stable and liquid system that can attract the enormous amounts of capital that the home finance system requires.  Any administrative changes must be carefully calibrated to support these outcomes and avoid disrupting a market that accounts for a significant share of US consumer investment.”

The memo expands the conversation about mortgage finance reform beyond the GSEs to include the other government supports for the housing system, including HUD/FHA, Ginnie Mae, VA, RHS and the Federal Home Loan Banks.  “We strongly support a comprehensive approach and commend the Administration for highlighting the importance of the larger federal support system for housing finance,” Zigas said.

Contact: Barry Zigas, 202-679-0169