Housing Finance Reform is Long Overdue

Housing Finance Reform

A vibrant housing market is a cornerstone of a strong U.S. economy. However, more than a decade after the Great Recession pushed the economy to the brink of disaster, the nation’s housing market continues to perform far below its potential.

The unsettled housing finance system contributes greatly to the problem. Uncertainty about the system stymies investment, slows the housing market, and presents downside risks to the broader economy.

While some steps have been taken to address weaknesses in the mortgage market, there has been no meaningful progress in implementing comprehensive reforms to the housing finance system to ensure that housing credit is available and affordable and is delivered through a sound and competitive system.

Solutions

The key to an effective secondary market system for conventional mortgages is a limited federal backstop for catastrophic circumstances. History shows the limitations of the private mortgage market. During bad times, private mortgage credit has fled the market, leaving government-supported mortgage loans as the primary or only option for qualified buyers. In the aftermath of the housing downturn, investors have been reluctant to invest in mortgage securities without government backing.

Federal support is particularly important in continuing the availability of the affordable 30-year fixed-rate mortgage that has enabled millions of American families to build wealth and financial security through homeownership.

Previous attempts at reforming the housing finance system have failed.

NAHB urges Congress to pass bipartisan housing finance legislation that would reform the current system and provide certainty to the marketplace while maintaining an appropriate level of government support for housing in all economic and financial conditions.