NAHB and NAR Joint Statement of Principles
NAHB and NAR Joint Statement of Principles
Government-Sponsored Enterprise Reform
March 2, 2005
Overview
The National Association of Home Builders and the National Association of REALTORS® affirm that the housing government-sponsored enterprises (GSEs) – Fannie Mae, Freddie Mac, and the 12 Federal Home Loan Banks – are vital elements of America’s housing finance system. The nation’s housing markets continue to buoy the economy and the housing finance system remains vibrant, despite recent accounting missteps, executive management changes, and related concerns about the GSEs. The National Association of Home Builders and the National Association of REALTORS® believe that a strong, credible safety and soundness regulatory regime, that preserves the housing mission of the GSEs, best serves the nation’s housing needs.
Mission
The public mission of the housing GSEs, as authorized by their federal charters, promotes access to mortgage credit to meet housing demand, including financing for single family and multifamily production needs throughout the nation. GSE programs, products, and activities should foster innovation and promptly respond to market needs.
The process for approving new programs should be as streamlined as possible but should also ensure that new programs completely satisfy mission as well as safety and soundness standards. Authority for the regulator to approve programs and activities or establish new regulatory requirements should not unduly delay or prevent the GSEs from developing new programs that support their missions.
All housing GSEs should meet affordable housing goals that are appropriate to their unique corporate structures. Challenging affordable housing goals should be designed to facilitate and ensure the efficient conveyance of GSE advantages to homeownership and multifamily housing production and preservation without disrupting housing finance markets.
The success of the secondary market depends on the ability of the GSEs to operate in a safe and sound manner while managing their credit and interest rate risks, providing liquidity in the housing finance markets, and meeting their charter responsibilities.
Financial Safety and Soundness Regulation
The National Association of Home Builders and the National Association of support strengthened GSE regulation that maintains confidence in the REALTORS® housing finance system and balances safety and soundness regulation and the federal role in housing and the housing finance system. Efforts to privatize, withdraw federal support, reduce the capacity, or in any other way diminish the ability of the GSEs to provide low-cost housing finance would undermine confidence in the housing finance system and are inconsistent with the need to assure continuation of their public missions.
The GSE regulatory regime should authorize the new regulator to establish risk-based capital standards and to require temporary increases in the minimum capital standard for GSEs to respond to extraordinary adverse financial conditions.
Structure of GSE Regulator
Regulation of Fannie Mae, Freddie Mac, and the FHLBanks should be through an independent agency that recognizes and facilitates their unique corporate and public missions, with appropriate authority and resources to oversee safety and soundness activities, programs, products, and activities that allow innovation and prompt response to market demands. Any regulatory governance structure should recognize and support the unique role that housing plays in the nation’s economy and public policy. The regulator should be charged with assuring that the GSEs carry out their housing missions in a safe and sound manner, without sacrificing either objective.
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