NAR Urges Reform of Mortgage Finance System

Reforming the secondary mortgage market is essential to ensuring a reliable source of mortgage lending for consumers in all types of markets and is integral to the nation’s economic and housing recovery, a representative of the National Association of REALTORS® said in testimony yesterday.

NAR’s 2012 Director of REALTOR® Party Activities Tom Salomone spoke before the House Financial Services Subcommittee on Capital Markets and Government-Sponsored Enterprises regarding proposed legislation by Rep. Scott Garrett (R-N.J.) to bring private capital back into the secondary mortgage market.

NAR believes that the concepts outlined in the draft legislation, the “Private Mortgage Market Investment Act,” could help create standards and uniformity, provide investors with greater transparency and ensure legal certainty regarding investors’ rights, which could help restore confidence and reignite the private label securities market. However, the long-term viability of the secondary mortgage market requires comprehensive reform.

“As the leading advocate for homeownership, NAR agrees with Rep. Garrett that greater transparency is needed in the trading of mortgage backed securities; however, to restore confidence in the market and ensure that the housing finance system works more efficiently and effectively in the future, this proposed legislation must be coupled with a comprehensive strategy for reforming the secondary mortgage market,” Salomone said.

NAR supports efforts to increase private capital in the housing finance market and reduce the size of the government’s involvement. Nonetheless, NAR believes that full privatization is not a viable option and that the federal government must have a continued role in the conventional conforming portion of the secondary mortgage market, beyond the Federal Housing Administration, to ensure a consistent flow of mortgage credit in all markets and all economic conditions.

Salomone testified that it’s critical that middle-class consumers have access to a steady flow of mortgage funding, especially during extreme economic conditions when private lenders have retreated from the marketplace. He said the housing market requires the participation of an entity that will remain active in the marketplace regardless of economic conditions.

“REALTORS® agree that a properly functioning housing finance market requires reducing the government’s participation and increasing private capital, but full privatization is not an effective option. Without some continued involvement by the federal government we risk losing affordable long-term, fixed-rate mortgage products. This would be devastating to middle-class home buyers and the housing market,” Salomone explained.

Source: NAR