Enterprise Point of Contact:
Jeanie ShattuckSenior Policy Analyst
Last Updated: April 28, 2012
Issue Background: Housing Finance & Government-Sponsored Enterprise Reform
The Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac), also known as government-sponsored enterprises (GSEs), were institutions created to supply liquidity to the housing finance market. The GSEs purchased home mortgage loans (both single-family and multifamily) that met specified criteria from mortgage originators, and either held them in portfolio or sold securities backed by the loans (mortgage-backed securities, or MBS). It was widely believed that both GSE debt and MBS sold through the GSEs had an implicit government guarantee.In September 2008, the GSEs were placed under conservatorship by the Federal Housing Finance Agency (FHFA) to ensure their financial soundness after mounting numbers of foreclosures in the single-family mortgage market caused large losses. At the time, the GSEs had reportedly already lost $14.9 billion since the beginning of the crisis in 2007 and together carried over $5 trillion in debt and mortgage-backed securities. The GSEs will remain in conservatorship until the federal government and Congress determine the best course of action for the future of the housing finance system.
The GSEs have provided much of the financing for multifamily housing, including a significant portion that is unsubsidized but affordable to lower-income families. Since 1996, the GSEs have provided more than $535 billion in multifamily mortgage debt to finance more than 11 million apartments. Even under conservatorship, the GSEs have provided $94 billion in mortgage debt for multifamily housing at a time when many other capital sources have left the market.
Current Policy State
The Administration proposed changes to the status of Fannie Mae and Freddie Mac in February 2011, as required by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Public Law Number 111-203). During both the 111th and 112th Congresses, the House Committee on Financial Services and the Senate Committee on Banking, Housing and Urban Affairs held numerous hearings on the future of the GSEs, debating topics such as causes of the financial crisis, recommendations for reform and analysis of other housing finance systems around the world.In addition to Congressional action, reform proposals have been released by several interested parties, including the Center for American Progress, Credit Suisse, the Housing Policy Council of the Financial Services Roundtable and the Mortgage Bankers Association. Many proposals recommend a government guarantee paid for by a fee on issuers for mortgage-backed securities that meet certain criteria. The guarantee would be explicit on the securities, not implicit on the debt of the issuers as was previously the case with the GSEs. The proposals differ in how many issuers there would be, the amount of regulation of the private label securities market, whether there would be “a duty to serve” the entire market, whether the issuers would retain loans in portfolio, and whether there would be affordable housing responsibilities.
Legislative and Regulatory Priorities
Enterprise's main concern is to provide capital, liquidity and stability for the multifamily mortgage market, including both the unsubsidized and subsidized housing inventory. Additionally, the next housing finance system must adequately and appropriately serve all markets and populations, including rural, small multifamily, special needs populations, and low- and extremely low-income households. For more information, view Enterprise's position paper on housing finance reform.Publications and Resources
Current Housing Finance/GSE-Related Legislative Proposals (112th Congress)
- Mortgage Finance Act (S. 1963)
- Secondary Market Facility for Residential Mortgages Act of 2011 (H.R.2413)
- Housing Finance Reform Act of 2011 (H.R.1859)
- GSE Bailout Elimination and Taxpayer Protection Act (H.R. 1182 and S. 693)
Obama Administration Housing Finance Reform Proposal
On February 11, 2011 the Department of the Treasury (Treasury) and the Department of Housing and Urban Development (HUD) released the Obama Administration’s proposal to reform the housing finance system by reducing the role of Fannie Mae and Freddie Mac in the mortgage market. The report also discussed the future of the Federal Home Loan Bank System.The administration offered three potential options for the long-term structure of the U.S. housing finance system. Each option recommends a transition to a system with a larger role for the private sector and targeted assistance to certain borrowers from the Federal Housing Administration, Department of Agriculture and the Department of Veterans Affairs. The three plans varied on the provision of a government guarantee—one option proposes no guarantee at all, one proposes a backstop only in the event of a severe market decline and one proposes a government reinsurance model. The report discussed the merits and drawbacks of each option.
The proposal’s short-term steps to encourage the return of private capital and reduce the government role in the housing market include increasing guarantee fees and reducing conforming loan limits. The report also stated that the Administration would work to promote a more balanced housing policy that provides rental and homeownership options for all Americans. This would include a renewed commitment to affordable rental housing to support those with the greatest needs, and responsible homeownership opportunities for low- and moderate-income households. For more information, read Reforming America’s Housing Finance Market: A Report to Congress and the Treasury press release.
Enterprise Resources
Real Estate Owned Asset Disposition
On September 15, 2011, Vice President, National Community Foreclosure Response Initiative Robert Grossinger provided comments to a Request for Information from the Federal Housing Finance Agency and HUD on Real Estate Owned Asset Disposition programs of Fannie Mae, Freddie Mac and the Federal Housing Administration.Stabilizing Housing Nationwide
On October 6, 2011, Senior Director, Policy Development and Research Andrew Jakabovics provided testimony before the House Financial Services Subcommittee on Insurance, Housing and Community Opportunity on bringing the private sector back into the housing market in a supportive and sustainable manner.Public Proposals for the Future of the Housing Finance System
On May 26, 2011 Enterprise President and Chief Executive Officer Terri Ludwig provided testimony on Principles for Housing Finance Reform before the Senate Committee on Banking, Housing and Urban Affairs.Housing Finance Reform and the Impact on Community Development
In his monthly Policy Points column in the Novogradac Journal of Tax Credits, Senior Director, Public Policy & Government Affairs, Peter Lawrence discusses issues related to housing finance reform and its impact on affordable housing, community development and the multifamily housing market.- Housing Finance Reform at One Year: Lots of Rhetorical Fire, Little Legislative Progress, February 2012
- Multifamily Finance: The Neglected Issue in the Fannie-Freddie Debate, February 2011
GSE Duty to Serve Underserved Markets
On July 22, 2010, former Vice President, Public Policy and Government Relations Adrienne Quinn provided Public Comment to the Federal Housing Finance Agencyon Fannie Mae and Freddie Mac’s duty to serve the manufactured housing, affordable housing preservation and rural markets.The Future of the Housing Finance System
On July 21, 2010, former Vice President, Public Policy and Government Relations Adrienne Quinn provided comments on the Future of Fannie Mae, Freddie Mac and the Housing Finance System. In addition, Enterprise has signed on to comments submitted by the Mortgage Finance Working Group (MFWG), organized by the Center for American Progress:- MFWG Response to Request for Public Input on Reform of the Housing Finance System
- MFWG Response to Request for Public Input on A Responsible Secondary Market System for Housing Finance