“This is why NAHB maintains that the program oversight that is currently conducted by HUD should not be transferred to the Treasury Department,” he said. “NAHB believes that Fannie Mae’s and Freddie Mac’s ability to spur innovative solutions to increase homeownership will continue only if the mission of these corporations is regulated by an agency that also has a housing mission, expertise and experience.”
Noting that the Treasury Department has virtually no experience or expertise in evaluating the effectiveness and appropriateness of housing policies, Rayburn added that moving program oversight authority to the Treasury could reduce the capacity of Fannie Mae and Freddie Mac to provide the liquidity and stability needed to keep mortgage credit available at the lowest possible cost to home owners and rental housing providers.
On the issue of capital requirements, NAHB supports a strong capital system for the GSEs and agrees that the safety and soundness regulator should have the flexibility to adjust capital standards as necessary, but cautions against immediate changes in either the GSE risk-based or minimum capital standards.
Rayburn said that NAHB would be willing to explore the idea of a stand-alone independent regulator, which has been floated as a compromise on the key issues of program oversight and independence of the financial regulator.
“While this is not our first preference, NAHB would be open to the idea of Fannie Mae, Freddie Mac and the Federal Home Loan Banks under such a system,” he said. “Our primary concern in any regulatory scenario is that the mission regulator must have a housing focus and expertise, and that the safety and soundness regulator must have sufficient respect and authority to satisfy Congress and the capital markets.”
NAHB further recommends that such an entity be governed by a board of directors rather than by a single agency head. A HUD representative should serve on the board of directors in order to ensure that it possesses a housing-oriented focus and experience.
To recognize and accommodate the differences between Fannie Mae and Freddie Mac and the Federal Home Loan Banks, Rayburn suggested that such a system establish two divisions and maintain separate funding for the costs of regulation.
Photos by Herman Farrer