The National Association of Home Builders (NAHB) announced a new framework for housing finance system reform designed to transition Fannie Mae and Freddie Mac to a new mortgage securitization system for single-family and multifamily conventional mortgages.

“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.

According to the NAHB, replacing 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 must be done in an orderly fashion over time. During this phase-in period, Fannie Mae and Freddie Mac would remain operational until the alternative system is fully functioning.

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, reports the NAHB, adding the federal government would guarantee the securities, not the mortgages.

The HFEs would only purchase mortgages that are well understood and have reasonable risk characteristics, such as standard 30-year fixed-rate loans. The HFEs would operate under the oversight of a strong independent regulatory agency to ensure all aspects of safety and soundness. NAHB believes the 12 regional Federal Home Loan Banks could serve as HFEs.

Federal support to the conventional mortgage of the future would consist of a privately funded insurance fund where the government would guarantee its solvency in a manner similar to the Federal Deposit Insurance Corporation’s backing of the fund that insures savings deposits.

NAHB’s housing finance reform blueprint also proposes to:

• Restart a carefully regulated fully private mortgage-backed securities system;

• Continue the role of the federal government housing agencies;

• Enhance the position of state and local housing finance agencies (HFAs) as a source of housing funds;

• Expand the role of the Federal Home Loan Banks (FHLBanks) in the housing finance system; and

• Repair flaws that produced the housing boom and bust.

The full white paper can be viewed on the NAHB’s website.



  1. I don’t know folks. Sounds like the “roles” will continue, and the guarantees will continue, and FDR is back! Plenty of protection for the homeowners and much that home-builders will like, but what we don’t see here are protections for the lenders and their profits. Easy credit, whether only to good credit homeowners or not, is easy credit, and that’s often a dangerous thing.

    When are we going to use arms-length transactions, discontinue subsidies and guarantees, shorten terms (kill 30 year mortgages), require substantial down payments, and employ floating interest rates? These are the things that will ensure the health of the banks and securities based on mortgages and take the taxpayer off the hook. The suggestions are one sided in this NAHB offering, and therefore a dangerous, short-term attempt to fix things.

    America’s home-building industry – too big to fail? How are the new (prop up F&F) financing regulations working out for you? Out of the woods yet? No? Had we truncated Fannie and her husband, we’d be over the hump by now instead of shoving trillions more their way in their unstoppable feeding frenzy.

    Occupy personal responsibility for a change, for a generation, and solidify our economy for the long-term!

  2. Wow! Amazing…this is one of the best post I’d read. I hope to read more of your incoming post. Well done.

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