Tag Archives: consumer choice

Treasury’s Take on Housing Finance Reform

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Treasury Secretary Mnuchin Being Sworn In

The Department of the Treasury released its Strategic Plan for 2018-2022. One of its 17 Strategic Objectives is to promote housing finance reform:

Support housing finance reform to resolve Government-Sponsored Enterprise (GSE) conservatorships and prevent taxpayer bailouts of public and private mortgage finance entities, while promoting consumer choice within the mortgage market.

Desired Outcomes

Increased share of mortgage credit supported by private capital; Resolution of GSE conservatorships; Appropriate level of sustainable homeownership.

Why Does This Matter?

Fannie Mae and Freddie Mac have been in federal conservatorship for nine years. Taxpayers continue to stand behind their obligations through capital support agreements while there is no clear path for the resolution of their conservatorship. The GSEs, combined with federal housing programs such as those at the Federal Housing Administration and the Department of Veterans Affairs, support more than 70 percent of new mortgage originations. Changes should encourage the entry of greater private capital in the U.S. housing finance system. Resolution of the GSE conservatorships and right-sizing of federal housing programs is necessary to support a more sustainable U.S. housing finance system. (16)

The Plan states that Treasury’s strategies to achieve these objectives are to engage “stakeholders to develop housing finance reform recommendations.” (17) These stakeholders include Congress, the FHFA, Fed, SEC, CFPB, FDIC, HUD (including the FHA), VA, Fannie Mae, Freddie Mac, the Association of State Banking Regulators as well as “The Public.” Treasury further intends to disseminate “principles and recommendations for housing finance reform” and plan “for the resolution of current GSE conservatorships.” (Id.)

This is all to the good of course, but it is at such a high level of generality that it tells us next to nothing. In this regard, Trump’s Treasury is not all that different from Obama and George W. Bush’s. Treasury has not taken a lead on housing finance reform since the financial crisis began. While there is nothing wrong with letting Congress take the lead on this issue, it would move things forward if Treasury created an environment in which housing finance reform was clearly identified as a priority in Washington. Nothing good will come from letting Fannie and Freddie limp along in conservatorship for a decade or more.

Treasury’s Trojan Horse for The CFPB

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The Procession of the Trojan Horse in Troy by Giovanni Domenico Tiepolo

The Hill posted my latest column, Americans Are Better off with Consumer Protection in Place. It opens,

This month, the Treasury Department issued a report to President Trump in response to his executive order on regulation of the U.S. financial system. While the report does not seek to do as much damage to consumer protection as the House’s Financial Choice Act, it proposes a dramatic weakening of the federal government’s role in the consumer financial services market. In particular, the report advocates that the Consumer Financial Protection Bureau’s mandate be radically constrained.

Republicans have been seeking to weaken the CFPB since it was created as part of the Dodd-Frank Act. The bureau took over responsibility for consumer protection regulation from seven federal agencies. Republicans have been far more antagonistic to the bureau than many of the lenders it regulates. Lenders have seen the value in consolidating much of their regulatory compliance into one agency.

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