New Opportunities for Future of Housing Finance Industry
Here is a roundup of a number of recent events surrounding the opportunities for comprehensive reform of the housing finance industry following the 2016 election, the health of the Federal Housing Administration’s (FHA) Mutual Mortgage Insurance Fund, and the future of Fannie Mae and Freddie Mac (GSEs) after conservatorship:
- Opportunities for Housing Reform in New Administration. In an op-ed in National Mortgage News, Clifford Rossi highlights the opportunities for a comprehensive overhaul of the housing finance system following the historic 2016 election. Rossi notes that the new administration and Congress bring momentum and hope for comprehensive housing reforms and long-lasting changes in the secondary mortgage market, including reforming the GSEs and FHA. He cites “dramatically reducing the federal footprint in housing finance” and the implementation of a coordinated federal housing policy as key criteria for reform.
- FHA Releases 2016 Annual Report. The FHA released its 2016 annual report to Congress highlighting the health of its Mutual Mortgage Insurance Fund (MMIF) for Fiscal Year 2016. In its response to the report, USMI stated: “Consistent with improvement in the overall mortgage credit market, we welcome the news that FHA’s single-family forward program and the home equity conversion mortgage (HECM) program are combined above the statutory required 2 percent capital ratio. Now that FHA’s single-family fund has climbed its way back, this moment presents an opportunity for the new Administration and lawmakers to consider a coordinated housing policy to ensure broad access to low down payment lending while reducing the government’s footprint in housing and protecting taxpayers.” “The MI industry and FHA should serve complementary roles to promote broad and sustainable homeownership. To accomplish this, FHA needs to not only become more financially resilient, in line with the rest of the financial system, but also remain focused on its core mission of serving underserved communities. USMI stands ready to work with the new Administration and Congress to enhance a mortgage finance system that meets the needs of low down payment borrowers while protecting taxpayers.”
- GAO Report on the Future of the GSEs after Conservatorship. The Government Accountability Office (GAO) released a report on the Federal Housing Finance Agency’s (FHFA) goals for the Fannie Mae and Freddie Mac conservatorships and the implication of FHFA’s actions for the future of the GSEs and the broader secondary market. The report urges Congress to consider legislation to establish objectives for the future federal role in housing finance and a transition plan to reform the housing finance system that enables the enterprises to exit conservatorship. This report is in response to an April 2016 letter from Sen. Richard Shelby (R-AL) requesting reports from GAO and the Congressional Budget Office on FHFA and the GSEs.
- MBA, NAHB, NAR Send Letter to Congress. The Mortgage Bankers Association, National Association of Home Builders and National Association of Realtors wrote a joint letter to Congress urging it to quickly act to renew a tax extenders package that includes provisions to provide certainty to the residential real estate market. The letter specifically calls for the extension of the mortgage debt forgiveness income exclusion and the mortgage insurance premium deduction. The deduction became effective in 2007 and is set to expire in 2016 unless Congress extends or makes it permanent. Tax savings associated with the mortgage insurance deduction can be a decisive factor for many prospective borrowers. In 2014, 4.2 million taxpayers benefited from deductions for mortgage insurance, with an average deduction of $1,403. The total amount of deductions claimed in 2014 was nearly $6 billion.