Administration Proposes Major Changes to the Nations Housing Finance System

Last month the Trump Administration unveiled a proposal to overhaul the federal government, including a number of major changes to the nation’s housing finance system. Enterprise’s Vice President for Policy Development, Andrew Jakabovics, explains that the proposal calls for ending the conservatorship (and charters) of Fannie Mae and Freddie Mac (collectively, the Government Sponsored Enterprises or GSEs), creating a paid-for guarantee of catastrophic risk on mortgage-backed securities, and establishing other fully private guarantors. Using previous Enterprise policy recommendations for housing finance reform as a guide, Jakabovics notes that the proposal is largely in line with the mainstream, bipartisan consensus around reform efforts, including the role of a paid-for government backstop that would limit investor losses on mortgage-backed securities without guaranteeing the entities issuing them. However, the proposal is entirely silent on the future of rental housing finance and the GSEs’ multifamily business lines, and makes a critical mistake in assuming that affordable housing objectives and traditional underwriting are mutually exclusive. Enterprise will continue to remain engaged on this critical issue and work towards a future system that is structured to protect taxpayers while broadly serving the needs of homeowners and renters.

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