Key Issues

Regulatory

A strong, resilient housing system relies on clear regulations that promote effective risk management practices, controls, and compliance measures to facilitate the flow of capital through the system, protect investors, and provide consumers with access and choices for affordable home loan options. HPC members advocate for: 

  • Consistent interpretation and application of regulations;
     

  • Fair and balanced regulations that allow all segments of the marketplace to operate in a consistent manner, without advantage or disadvantage;
     

  • Rules that foster competition and transparency;
     

  • Standards that protect consumers, including appropriate information disclosures and notices, responsible underwriting, and proactive loss mitigation and servicing practices.

 

HPC members respond to regulatory proposals and requests from regulatory agencies for input on various policy issues and also pre-emptively recommend regulatory enhancements to address system imbalances or to ensure that rules are keeping pace with industry practice.

Tech & Innovation

Comprised of leading companies in housing finance, HPC is well-positioned to drive innovation in the mortgage marketplace. HPC member firms directly develop cutting- edge technologies and tools and/or serve as the primary clients to the market participants who do so. As such, HPC members are stakeholders who influence the design, production, and deployment of advanced technology platforms and applications. HPC members set the pace for progress, improving processes and practices across various lines of business. The goals of innovation include improved customer experience, operational efficiency, and risk-management effectiveness. Some of the areas where HPC members are advocating for innovation and process improvement include:

  • Digital Mortgage Environment: HPC members are driving the dialogue regarding how to remove or reduce paper documents and “wet signatures” from the process, to offer customers a streamlined and efficient mortgage experience. Various state and federal regulatory challenges must be addressed, but HPC members are working with stakeholders to rethink existing rules and practices.

  • Government Technology: HPC members are engaged with FHA and Ginnie Mae to upgrade their technology systems to keep pace with the broader industry, moving towards greater use of data and a digital foundation for managing assets.
     

  • Appraisals: The discussion regarding the future of residential property appraisals is underway. HPC members advocate greater use of data and technology to enhance the overall valuation process, improve risk management, and introduce new efficiencies.
     

  • Digital Offerings: Through the utilization of mobile applications and enhanced online capabilities, America’s leading operators in housing finance are leveraging these new technologies to provide greater support and improved outcomes for customers. Digital offerings that improve transparency and provide greater customer support will improve communications and, in many cases, allow for efficiencies that lead to long run cost savings.
     

  • Data Protection/Security: Investments in new technologies that further protect customer data should be prioritized. Through the utilization of new systems and infrastructure, companies will be able to improve data protection and enhance the overall security and stability of the housing finance system.

Housing Finance Reform

Roughly half of the single-family mortgage market is securitized through two government-sponsored enterprises, Fannie Mae and Freddie Mac. Since their failure and placement in government conservatorships in 2008, the federal government has been responsible for their operations and taxpayers continue to provide the financial backing that allows Fannie Mae and Freddie Mac to operate. Legislative housing finance reform is badly needed to reset the appropriate roles of the public and private sectors, respectively.
 

Through housing finance reform, Congress and the Administration should ensure that Americans have access to affordable and suitable home financing options while also ensuring that the system operates safely, soundly and with minimal risk to taxpayers. Comprehensive housing finance reform goes beyond just a resolution of the conservatorships. It must consider the entire secondary mortgage market, including Ginnie Mae and the private label securitization markets.

Housing finance reform should be comprehensive and should strive for the following outcomes:

  1. A deep and liquid mortgage-backed securities market for multiple mortgage products, including the 30-year, fixed-rate product, that gives eligible borrowers access to credit throughout the business cycle and offers all types of lenders entree to the secondary market.
     

  2. A mechanism that allows lenders to offer consumers an efficient way to lock in an interest rate before loan closing (TBA market).
     

  3. Multiple channels for private capital to support and finance residential mortgages.
     

  4. A level playing field for secondary market access across business model,charter type, size of lender, and source of credit enhancement, giving home buyers choices among mortgage originators and reducing systemic risk.
     

  5. Competition and market efficiency in lending, credit risk syndication, and mortgage servicing to keep mortgage rates low and give consumers choice among lenders and mortgage products.
     

  6. Replacement of separate Fannie & Freddie MBS with a single deep, liquid MBS security with multiple issuers, backed by private capital and wrapped with a market-financed government guarantee to broaden the investor pool for U.S. mortgage assets, thereby keeping mortgage rates low.
     

  7. A securitization infrastructure that operates with a set of standards for mortgage servicing, investor disclosure, and dispute resolution.
     

  8. A mandatory funding mechanism and policy to fulfill affordable housing needs in more targeted and effective ways, including modernizing and refreshing FHA.
     

  9. Consistency in regulation and enforcement to reduce unnecessary compliance costs, provide certainty, and foster private markets.
     

  10. Regulatory support for a deep and liquid private-label securitization as an alternative to government-backed securities.

FHA/Government Housing Reform

The Federal Housing Administration (FHA), the world’s largest mortgage insurance agency provides access to affordable home loans. FHA products traditionally serve first- time homebuyers, a market segment with a higher proportion of low-income and moderate-income families and households of color. Today, FHA operations are funded through the congressional appropriations process. As a result, FHA’s insurance premiums are used to pay claims but cannot otherwise be invested in developing its risk management practices or modernizing its technology or business operations absent explicit congressional appropriations to do so.
 

The value of FHA in reaching the historically underserved is undeniable, but the

agency’s capacity to deliver against its mission and critical risk-management obligations is severely compromised by years of constricted resources. It is time for FHA to modernize for the 21st century, to more efficiently manage risk and fulfill its mission to serve consumers. The Housing Policy Council believes that legislative action is needed to address and fix FHA’s shortcomings:
 

  • Restructure FHA as a government corporation, housed within HUD.
     

  • Give the FHA Commissioner authority like a CEO to manage the operations of FHA, to fulfill the mission, manage risk in a safe and sound manner, andensure the financial health of the FHA Corporation.
     

  • Fund all business operations with the FHA insurance receipts; this revenue can also continue to support other HUD programs.
     

  • Enhance the enforcement actions available to FHA’s Mortgagee Review Board (MRB) to pursue and penalize FHA lenders that violate FHA rules.
     

  • Modernize FHA technology, compensate staff at levels comparable to Federal bank regulators, update policies to better serve FHA borrowers, and publish clear enforcement standards to enable confident participation in FHA by responsible lenders of all sizes and business models.

 

Congress could pursue FHA Modernization as free-standing legislation or as part of comprehensive housing finance reform.

Affordable Housing

Affordable housing is a complex set of issues that involves both national and local policies and practices and that must consider both local conditions and a legacy of past discriminatory practices. It covers both rental and ownership markets.
 

Affordable rental is the most critical housing issue facing the nation today. Without affordable rental opportunities for the country’s lowest income households, the journey to improved economic prosperity often remains stuck at the starting gate.
 

Home ownership creates opportunities for families to find personal expression and freedom, to build bonds within a community, and to build wealth over time. Too often, our haste to expand ownership has resulted in unsustainable lending practices, with the victims being the very people government and private lending programs intended to help.
 

To help more families achieve the long-term benefits of homeownership while reducing the cost and the incidence of default, we must consider alternative pathways to homeownership and more sustainable lending practices that help to ensure families navigate rough seas, whether due to economic turbulence or personal setbacks.
 

HPC supports mechanisms to stimulate the production and preservation of affordable rental housing and to bolster targeted homeownership assistance programs. Appropriations for housing programs are not keeping pace with housing needs in the country and housing supply shortages are acute in many areas. Therefore, given the benefits derived from the government guarantee envisioned in housing finance reform, it is reasonable for such legislation to establish a transaction fee to expand the supply of necessary affordable housing and target funds to support lower-income renters and homebuyers.
 

HPC members urge that any new funds for homeownership assistance go directly to the households in need, reducing the barriers to entry and financial challenges that these individuals and families face. HPC believes that new funds should not be used to simply subsidize higher-risk loans, or to compensate the industry to make loans that may not perform using more lenient underwriting criteria.
 

Funds used to address the areas of risk that drive the increased pricing, rather than subsidizing that pricing, would better serve the households in need. Examples of these types of programs include down payment assistance grants that enable households to enter homeownership with some amount of equity in the property; savings programs that offer matching funds to increase the down payment amount or that create “rainy- day” reserves to address future needs; and dedicated accounts that could be tapped by homeowners in financial distress to avoid missed payments and/or foreclosure. The application of dollars to these types of programs, as well as critical homeownership counseling and education services, would help families prepare for and sustain homeownership, improve access, address the real barriers, and create a true financial benefit and performance boost for low-income and moderate-income (LMI) households.
 

Beyond policy prescriptions, HPC members are committed to seeking partnerships with housing finance agencies, housing advocates, and civil rights groups to enable greater and more sustainable home ownership opportunities, particularly for lower-income households and racial and ethnic groups that often lag behind in homeownership.

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