Bipartisan Policy Center Conversation with HUD Secretary Donovan
On April 22, 2014, the Bipartisan Policy Center (BPC) and New York University Wagner invited Secretary Shaun Donovan of the Department of Housing and Urban Development (HUD) to discuss government-sponsored enterprise (GSE) reform and the state of the U.S. housing market with Richard Smith, CEO and President of Realogy Holdings Corporation and a member of the BPC’s Housing Commission.
Opening Remarks
In his opening remarks, Donovan noted that partisanship and ideology have stood in the way of moving the country forward, but said that housing finance reform is an issue that draws diverse and strong networks together because it “touches everyone’s lives.”
Donovan said the state of housing market impacts the state of the nation as a whole, adding that in the best of times everyone benefits from a well-functioning, liquid market. However, he said, the last decade saw responsibility give way to recklessness far too often, and by the time President Obama took office in 2009 the housing market was in a freefall.
While Donovan acknowledged that the situation has improved since then, he said that everyone has a stake in turning the system around for good through housing finance reform.
Warning against stakeholders growing content with mild gains, Donovan stressed that too many people do not have access to credit and lenders are struggling to work around red tape. He said that housing finance needs to be reformed “once and for all,” and that no matter your background everyone should agree with this.
Donovan said there is good news, as the Johnson-Crapo GSE reform bill is a real opportunity “to make something happen.” He pointed out that the bill would ensure certainty in the housing finance system, wind down Fannie Mae and Freddie Mac, bring private capital back into play and restore equilibrium in the marketplace, and use market-based incentives to ensure broad access to credit. He said he was very pleased that affordability across all segments of the housing market, including the rental space, is addressed in Johnson-Crapo.
Accepting that all parties concerned have reservations about the bill, Donovan said that despite its imperfections, it “absolutely” represents progress. He said “we have a chance to come together and bring this across the finish line.”
Questions and Answers
Smith, noting that it is “difficult to be rational and practical” in Washington, asked what practical issues can be impediments to the outstanding issues of Johnson-Crapo.
Donovan answered that it is not a simple bill, and is particularly difficult to move forward in an election year. He expressed concern that if the Senate does not act quickly, it will be very difficult to get the bill through the House. He said he was encouraged, however, by the fact that housing brings unusual coalitions together and that there seems to be a sense of urgency among Democrats in the Senate to get the bill done. For conservatives, he said the concern about the status quo continuing becomes greater as we move further from the crisis. Overall, Donovan said, both sides have reason to push housing finance reform forward.
Smith next asked what aspects of Johnson-Crapo would incentivize the private market to return to the housing finance market with fresh capital.
Donovan said the present system presents a great deal of uncertainty, and that investors do not know how long the current system will be around, leading to a sort of “limbo state.” There also are no clear “rules of the road” for investors, he added. He said that eliminating uncertainty about the system and creating clear rules for investors would be critical to enticing private capital to return to the market.
Asked about the role of the Federal Housing Administration in a post-Johnson-Crapo world, Donovan said the agency has traditionally made up about 15% of the housing market and helps service people who otherwise could not get loans. Today, however, he said the FHA is outsized because so many people are unable to get loans elsewhere, and it serves as the sole source of credit for many minority communities. He expressed hope that Johnson-Crapo would restore a system where FHA will not be the only source of credit and the agency will be able to return to its historically more-limited role.
For more information on this event, please click here.
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On April 22, 2014, the Bipartisan Policy Center (BPC) and New York University Wagner invited Secretary Shaun Donovan of the Department of Housing and Urban Development (HUD) to discuss government-sponsored enterprise (GSE) reform and the state of the U.S. housing market with Richard Smith, CEO and President of Realogy Holdings Corporation and a member of the BPC’s Housing Commission.
Opening Remarks
In his opening remarks, Donovan noted that partisanship and ideology have stood in the way of moving the country forward, but said that housing finance reform is an issue that draws diverse and strong networks together because it “touches everyone’s lives.”
Donovan said the state of housing market impacts the state of the nation as a whole, adding that in the best of times everyone benefits from a well-functioning, liquid market. However, he said, the last decade saw responsibility give way to recklessness far too often, and by the time President Obama took office in 2009 the housing market was in a freefall.
While Donovan acknowledged that the situation has improved since then, he said that everyone has a stake in turning the system around for good through housing finance reform.
Warning against stakeholders growing content with mild gains, Donovan stressed that too many people do not have access to credit and lenders are struggling to work around red tape. He said that housing finance needs to be reformed “once and for all,” and that no matter your background everyone should agree with this.
Donovan said there is good news, as the Johnson-Crapo GSE reform bill is a real opportunity “to make something happen.” He pointed out that the bill would ensure certainty in the housing finance system, wind down Fannie Mae and Freddie Mac, bring private capital back into play and restore equilibrium in the marketplace, and use market-based incentives to ensure broad access to credit. He said he was very pleased that affordability across all segments of the housing market, including the rental space, is addressed in Johnson-Crapo.
Accepting that all parties concerned have reservations about the bill, Donovan said that despite its imperfections, it “absolutely” represents progress. He said “we have a chance to come together and bring this across the finish line.”
Questions and Answers
Smith, noting that it is “difficult to be rational and practical” in Washington, asked what practical issues can be impediments to the outstanding issues of Johnson-Crapo.
Donovan answered that it is not a simple bill, and is particularly difficult to move forward in an election year. He expressed concern that if the Senate does not act quickly, it will be very difficult to get the bill through the House. He said he was encouraged, however, by the fact that housing brings unusual coalitions together and that there seems to be a sense of urgency among Democrats in the Senate to get the bill done. For conservatives, he said the concern about the status quo continuing becomes greater as we move further from the crisis. Overall, Donovan said, both sides have reason to push housing finance reform forward.
Smith next asked what aspects of Johnson-Crapo would incentivize the private market to return to the housing finance market with fresh capital.
Donovan said the present system presents a great deal of uncertainty, and that investors do not know how long the current system will be around, leading to a sort of “limbo state.” There also are no clear “rules of the road” for investors, he added. He said that eliminating uncertainty about the system and creating clear rules for investors would be critical to enticing private capital to return to the market.
Asked about the role of the Federal Housing Administration in a post-Johnson-Crapo world, Donovan said the agency has traditionally made up about 15% of the housing market and helps service people who otherwise could not get loans. Today, however, he said the FHA is outsized because so many people are unable to get loans elsewhere, and it serves as the sole source of credit for many minority communities. He expressed hope that Johnson-Crapo would restore a system where FHA will not be the only source of credit and the agency will be able to return to its historically more-limited role.
For more information on this event, please click here.