ALTA's advocacy efforts for comprehensive legislation to restructure our nation’s housing finance system
Fannie Mae and Freddie Mac were put into conservatorship in September 2008 and received a taxpayer bailout of $187 billion. Congress has yet to enact comprehensive legislation to restructure our nation’s housing finance system to prevent future taxpayer-funded bailouts and establish a sustainable market for housing credit. In the absence of legislative reform, the Federal Housing Finance Agency (FHFA) has taken steps to lay a foundation for reform, including expanding risk-sharing activities between the Government Sponsored Enterprises (GSEs) and private investors and developing a common securitization platform.
Impact to the Industry
ALTA continues to work with Congress as it considers reform to the nation’s housing finance system. Homeownership: (1) helps families build connections to their communities, (2) provides retirement security, (3) funds post-secondary education and (4) supplies capital for entrepreneurs to start new businesses. These benefits are only possible because Americans have access to an affordable and efficient mortgage finance system.
The title insurance and real estate settlement industry benefits from uniformity and standardization provided by Fannie Mae and Freddie Mac. This national standard-setting and uniformity, paired with state law governance of the transfer of interests in real property, must be maintained in a future housing finance system.
ALTA has advocated that our future housing finance system should:
- Not allow publicly traded companies to privatize gains while taxpayers subsidize losses;
- Maintain uniformity and standardization, which are the backbone of the mortgage market and improve the efficiency, accuracy and transparency of the housing finance system and lower barriers to entry for private capital. These standards include uniform mortgage documentation, minimum underwriting standards (particularly underwriting legal title risks) and uniform loan level data sets which promote the liquidity necessary to support the “To Be Announced” (TBA) market and ensure the continued existence of certain beneficial products like the 30-year fixed rate fully pre-payable mortgage. At the loan level, product standards reduce the credit and product risk variables in the market. This uniformity helps investors efficiently and accurately value mortgage backed securities (MBS) for the TBA market. At the security level, uniformity allows issuers to better blend loans from across the country by diversifying the credit risk. This helps lenders set uniform mortgage rates for equivalent borrowers throughout the country. In addition, the GSEs current market standards provide consumers with the transparency necessary to limit the potential for predatory practices.
- Ensure the uninterrupted availability of affordable mortgage credit for all qualified homebuyers in all economic conditions; and,
- Serve all communities equally by allowing lenders, service providers and other market participants of all types and sizes, including community banks and credit unions, to compete on fair and equivalent grounds.