April 3, 2019

A Reader’s Guide to the President’s Memorandum on Housing Finance Reform

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Last week, the president issued a memorandum directing the heads of various agencies – primarily the Treasury and HUD secretaries – to lay out a plan for housing finance reform that could be accomplished through a mix of legislative and administrative actions. Enterprise has developed an initial analysis of the memo, including its implications for affordable housing.

The plan the president requested would be the first concrete proposal by the executive branch since 2011’s Reforming America’s Housing Finance Market. The new memo takes a broad view of the housing finance system: rather than focusing on Fannie Mae and Freddie Mac (typically referred to as the government-sponsored enterprises, or GSEs), it includes potential changes to FHA and Ginnie Mae, in addition to the Federal Home Loan Banks, in any plan. While the memo leaves a lot of critical elements of a robust housing finance system to be determined, it does hint that the new system should be in some ways similar to what is currently in place, albeit with an explicit, paid-for guarantee on the GSEs’ mortgage-backed securities (MBS).

Beyond that, however, the memo implies a system with reduced requirements for the GSEs to ensure broad mortgage access and affordable products for underserved borrowers and communities, and it introduces the possibility of a twotiered market with minimal overlap between FHA and the GSEs, which would be a mistake. The preamble offers no recognition of the financing needs of multifamily properties that provide homes for renters.

Consequently, the memo leaves the role of the GSEs and FHA in multifamily finance to be defined, without offering guidance or a clear indication of a sophisticated understanding of how multifamily finance differs from single-family finance, how the two categories performed during the 2009 housing crisis, or how multifamily finance supports affordable homes. Beyond that, however, there are concerning hints of reduced support for access in affordability across the whole set of actors and little detail on, or even recognition of the needs of, financing for multifamily properties that provide homes for renters.

Enterprise has elsewhere laid out the principles by which we will evaluate any reform proposals, so here we offer a section-by-section analysis to help readers understand the context and implications of the language in the memo. As the housing finance reform process plays out in Congress and the administration, we will continue to focus on ensuring that the resulting system provides stable access to affordable single-family and multifamily credit for all eligible borrowers, both across geographies and throughout the business cycle; promotes broad access to sustainable homeownership for all creditworthy families; and expands support for rental housing that is affordable to low- and moderate-income households.

Read the Analysis

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