Policy by Polling to Seal Fates of Fannie and Freddie

Written by: Steve Cook   Thu, April 15, 2010 Beyond Today’s News, Crisis Programs, Crisis Watch

Yesterday the Treasury Department released a seven question public poll whose results will provide input on the future of Fannie Mae and Freddie Mac.

In addition to the poll, the Obama Administration will plans to hold a series of public forums across the country on housing finance reform.  ”Together these opportunities for input will give the public the chance to deepen the federal government’s understanding of the issues and to shape the policy response going forward,” Treasury said in a statement. The administration has said it would like to make its legislative proposal early next year, after failing to meet a deadline earlier this year of producing a preliminary report on how to recast the nation’s housing-finance system.

The highly unusual move and the basic nature of some of the questions, such as “what role should the federal government play in supporting a stable, well-functioning housing system,” is raising questions about the Administration’s commitment to a federal role in the housing markets after it has spent more than $100 billion in the past 18 months to stabilize mortgage interest rates.

“We don’t need polls, we need leadership,” Rep. Spencer Bachus (Ala.) told the Washington Post. “The press release accompanying this list of questions says their goal is to be transparent. What is abundantly clear is that the Obama administration has no real plan for dealing with housing finance.”

Here are the questions. 



1.      How should federal housing finance objectives be prioritized in the context of the broader objectives of housing policy?

  • Commentary could address: policy for sustainable homeownership; rental policy; balancing rental and ownership; how to account for regional differences; and affordability goals.

2.      What role should the federal government play in supporting a stable, well-functioning housing finance system and what risks, if any, should the federal government bear in meeting its housing finance objectives?   

  • Commentary could address: level of government involvement and type of support provided; role of government agencies; role of private vs. public capital; role of any explicit government guarantees; role of direct subsidies and other fiscal support and mechanisms to convey such support; monitoring and management of risks including how to balance the retention and distribution of risk; incentives to encourage appropriate alignment of risk bearing in the private sector; mechanisms for dealing with episodes of market stress; and how to promote market discipline.

3.      Should the government approach differ across different segments of the market, and if so, how?   

  • Commentary could address: differentiation of approach based on mortgage size or other characteristics; rationale for integration or separation of functions related to the single-family and multi-family market; whether there should be an emphasis on supporting the production of subsidized multifamily housing; differentiation in mechanism to convey subsidies, if any.

4.      How should the current organization of the housing finance system be improved?

  • Commentary could address: what aspects should be preserved, changed, eliminated or added; regulatory considerations; optimal general organizational design and market structure; capital market functions; sources of funding; mortgage origination, distribution and servicing; the role of the existing government-sponsored enterprises; and the challenges of transitioning from the current system to a desired future system.

5.      How should the housing finance system support sound market practices?

  • Commentary could address underwriting standards; how best to balance risk and access; and extent to which housing finance systems that reference certain standards and mortgage products contribute to this objective.

6.      What is the best way for the housing finance system to help ensure consumers are protected from unfair, abusive or deceptive practices?

  • Commentary could address: level of consumer protections and limitation; supervising agencies; specific restrictions; and role of consumer education

7.      Do housing finance systems in other countries offer insights that can help inform US reform choices?

Once the questions are published in the Federal Register (http://www.regulations.gov/search/Regs/home.html#home), members of the public can send in their answers.

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