AS A LARGE, SECOND-GENERATION HOME builder who has always taken an active interest in mortgage banking, I have watched and participated in a virtual transformation of our housing finance system over the past 25 years. With Fannie Mae, Freddie Mac, and the Federal Home Loan Bank System leading the way, this country has made extraordinary progress in expanding homeownership opportunities. Our prospects have grown even brighter with the introduction of amazing computer technologies enabling borrowers' credit needs to be met more effectively and efficiently than ever before.
As we have seen from housing's strength in supporting the U.S. economy—including record refinancing activity that bolstered consumer spending—the repercussions of our achievements in home financing extend far and wide. As this economy starts churning out more growth and more jobs, we need to remember how the monetary policies of the Federal Reserve and the fiscal policies of the Bush administration have helped carry us through some difficult times.
Today's housing markets should continue to flourish even as the Fed shifts from deflation-fighting policies to concerns over an expanding economy. Mortgage interest rates are expected to increase slowly and remain relatively affordable. Adjustable rate loans will alleviate some of the pressure of rising rates for buyers who find themselves teetering on the edge of affordability as growth in household income and jobs picks up the slack. This suggests a fairly optimistic forecast for production builders, but recent efforts in Washington to clamp down on our housing finance system are an emerging threat to the health of our industry.
By distancing the special relationship the federal government has with these housing institutions, and the priority they give to housing in the financial markets, this bill represents a dangerous retrenchment from housing policies that have reaped enormous economic and social benefits over the past several decades. It is a direct threat to the strongest and most respected home finance system in the world—designed to discourage investment in housing.
This bill, S. 1508, raises many concerns for housing. A provision that would enable GSE regulators to liquidate a GSE through receivership unless Congress opposed it would erode the government-sponsored status of these institutions and increase their borrowing costs. Under the bill's governance structure, decisions on housing mission issues would be in the hands of a single, politically appointed director whose focus might be on concerns that aren't in the best interests of housing. And the regulator would have overly broad and general authority to adjust minimum capital standards, which could result in the overcapitalization of the GSEs and less money for mortgages.
Fortunately, the administration has come out and opposed this measure. A valiant campaign by the NAHB helped change some of the bill's most damaging provisions. For now, the bill probably lacks the support it needs to move forward. The bad news is that overseers of the GSEs—the Office of Federal Housing Enterprise Oversight, the Treasury, and HUD—are studying how they might accomplish the same anti-housing objectives as S. 1508 through the regulatory process. And Congress may very well address this issue next year.
With the U.S. population and household formations expected to grow vigorously in coming years, preserving our government's long-standing commitment to housing is paramount for big builders. A diversion of capital away from our industry could be catastrophic, and we cannot allow it to happen.
Editor's Note: This column is a forum provided to the CEOs of America's largest home builders in cooperation with the NAHB. Address responses to BIG BUILDER's editor at [email protected].
