The National Association of Home Builders (NAHB) has published a new framework for housing finance system reform that is designed to transition Fannie Mae and Freddie Mac to a new mortgage securitization system for single-family and multifamily conventional mortgages.
The NAHB plan replaces Fannie Mae and Freddie Mac with a new securitization system for conventional mortgages backed by private capital and a privately funded federal mortgage-backed securities fund. Under this scenario, Fannie Mae and Freddie Mac would be gradually replaced by private housing finance entities (HFEs) that would be chartered to purchase single-family and multifamily mortgages from loan originators and package the loans into securities for sale to investors worldwide. The federal government would guarantee the securities, not the mortgages.
Furthermore, the NAHB envisions the HFEs only purchasing mortgages that are ‘well understood and have reasonable risk characteristics, such as standard 30-year fixed-rate loans.’ The NAHB plan puts the HFEs under the oversight of a ‘strong independent regulatory agency to ensure all aspects of safety and soundness.’
‘Our plan seeks to overhaul the housing finance system to ensure that housing credit is available and affordable in the future and is delivered through a competitive, efficient, sound, safe and stable system,’ says NAHB Chairman Barry Rutenberg, a home builder from Gainesville, Fla.
The NAHB plan also calls for continuing the role of the current federal government housing agencies and expanding the role of the 12 Federal Home Loan Banks to allow these institutions to move beyond portfolio purchases to securitization.
The NAHB's full plan is available online.