ABA Housing Finance Recommendations Encouarge Less Government

In a letter to the Treasury and Department of Housing and Urban Development (HUD), the American Bankers Association (ABA) made recommendations geared toward the future of Government Sponsored Enterprises (GSEs).

The letter stated ABA’s belief that there is too much government involvement in housing finance matters. Recommendations included a path to transform the housing finanace role provided by GSEs.

“The end goal we envision is a housing finance market in which more than half of mortgage finance occurs without federal secondary market guarantees of any type,” said Frank Keating, ABA’s president and CEO, in the letter. “That vision may take years to attain. However, it is essential that we start taking incremental steps toward these goals, and trust in our ability to make mid-course corrections as we progress.”

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Policymakers should create a well-regulated covered bond market and should enhance the Federal Home Loan Banks to help provide advances to private market portfolio lenders with minimal taxpayer exposure, advised ABA.

“A well-regulated private market should be the desired financing source for the bulk of borrowers whose income and credit rating qualify them for conventional financing,” said Keating.

Among other ABA recommendations for the Treasury and HUD: an increase in “G fees,” or guarantees fees, in order to reduce government involvement and provide government compensation; and the creation of more reasonable loan limits for GSE purchases.

View the full letter.

Written by Elizabeth Ecker

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  • This is one of the most self serving statements I have read in the last few years. Here is the group which had to be bailed out not long ago and has yet to prove responsible lending behavior and risk management. The government and the American people have absolutely every right to question their judgment.

    This document says we understand what it is we need to do better than anyone else. Help us grow but stay around just in case we need you; we need a safety net for now. The statement reminds one of the hubris of a maturing teenager who believes he/she understands life well enough to be out on his/her own “but just in case don’t do anything with MY bedroom.”

    Seeing the cautious return of some lax lending standards shows that like the supposed doctors of the 1700s, these “wise men” are still “practicing.” Less than 4 years ago, this group turned a blind eye on what was actually happening in mortgage lending. Why do they believe they are in a position to provide guidance so soon?

    Rather than trying to move in yet another direction, let them first clean up the existing mess they helped to create. It is time for these wise men to take responsibility for the mess and actually start taking the lead to work their way out of it. It is not good enough just to be caretakers taking direction from the political whims of the President on how foreclosures should be handled. Let’s first see their wisdom, vision, and leadership expressed in cleaning things up.

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