October 29, 2013

Senator Warren Lays Out Housing Finance Reform Priorities in MBA Remarks

Remarks as prepared for delivery are available here

Washington, DC - In remarks to the Mortgage Bankers Association today, United States Senator Elizabeth Warren laid out her priorities for housing finance reform.  She stressed the importance of preserving the elements of the American housing finance system that promote widespread home ownership while putting in place safeguards that reduce systemic risk in the housing market.  The Senator also talked about increasing access to mortgage loan modifications, reducing unnecessary foreclosures, and designing a housing finance system that does not exacerbate Too Big to Fail.

Senator Warren explained that "aligning the interests of servicers, trustees, and investors in both the guaranteed and the private-label markets is critical because it will have an impact on the size and depth of any housing downturn. Increasing beneficial loan modifications and reducing unnecessary foreclosures can be the difference between a short, mild downturn and a lengthy, nationwide crisis."  She emphasized that "either collectively or individually, issuers of mortgage-backed securities that are government-guaranteed should have a clear and enforceable duty to serve the entire primary market." In outlining catalysts of the crisis, the Senator also made clear that while government sponsored enterprises made major mistakes that cost taxpayers, Fannie and Freddie's affordable housing goals were not to blame for crisis' underlying cause.

Senator Warren made the case for protecting the role of smaller financial institutions in housing finance because, "a housing market dominated by a handful of Too Big to Fail institutions would reduce access to mortgages in rural and poorer urban areas. It would also increase systemic risk and reduce innovation and customization in the primary market.  Any future housing finance system must ensure not only that smaller lenders can sell their loans into the secondary market, but also that they can do so at competitive rates and remain viable players in the primary market."

The Senator applauded Senators Corker and Warner for their role in advancing the housing finance reform debate and said that she welcomed Chairman Johnson and Senator Crapo's efforts to schedule hearings on the issue this fall. "Housing finance reform is a complex puzzle, and it will take a lot of work from a lot of people to make sure the pieces fit correctly... if we approach the task with seriousness and a hard look at the data and the facts, I believe we can temper the boom-bust cycle while maintaining the qualities that set the American housing market apart from the rest of the world."