The National Association of REALTORS® welcomed the Obama Administration's call for an orderly transition from the current form of the secondary mortgage market to a new structure that would enable Americans to achieve affordable, sustainable mortgages.
NAR believes that we cannot have a restoration of the former secondary mortgage market with entities that took private profits while pushing losses onto the taxpayer. The new system must involve some government presence, outside of FHA, USDA, and the Department of Veterans Affairs, to ensure a continued flow of capital to housing markets during economic downturns when large lenders flee the housing market, NAR President Ron Phipps said in response to the plan released today by the Obama Administration for reforming the housing finance market.
As the leading advocate for home ownership, NAR recognizes that the existing system failed and that changes are needed to protect taxpayers from an open-ended bailout. We believe there must be a certain level of government participation to provide middle-class families access to affordable mortgages at all times and in all markets, Phipps said.
A system that is dominated by a few large banks that are too-big-to-fail would inevitably involve huge taxpayer risk of another bailout. An efficient and adequately regulated secondary mortgage market must make available to consumers simple yet safe, reliable mortgage products like the 15- and 30-year fixed-rate mortgages, Phipps said.
NAR believes that the size of the government's participation in housing finance should decrease if the market is to function properly, but notes that when private capital fled the marketplace during the recent financial crisis, government backing of residential mortgages was critical in sustaining the housing market. Without government support, the financial crisis could have been far worse, Phipps said. NAR's economists estimate that a retreat of capital from the housing market will negatively impact the economy; because for every 1,000 home sales, 500 jobs are created for the country.
NAR encourages private sector participation in less traditional mortgages in innovative ways, such as through covered bonds. NAR, however, opposes raising fees for current well-qualified consumers to cover losses stemming from mistakes made in the private business decisions of the former Fannie Mae and Freddie Mac.
Reducing the government's involvement in the mortgage finance market is necessary for a healthy market, but should not be done at the expense of the economy or home buyers, said Phipps. Any proposal for increasing fees and borrowing costs beyond actuarially sound levels will only make it harder for working, middle-class individuals to achieve home ownership, and only the wealthy will be able to achieve the American dream.
We welcome the Administration's desire to engage stakeholders in the final plan and we want to serve on any advisory panel that will study the consolidation of federal incentives for housing. We also look forward to working closely with Congress. NAR has been representing the interests of home owners for more than 100 years and our goal is to bring their interests into this debate as well. We want to help design a secondary mortgage model that will serve home owners today and in the future, and ensure a strong housing market and full economic recovery, Phipps said.