In Housing Finance Proposals, Treasury Finds Questions, Not Answers

More than a year after releasing a white paper that set forth three options for housing finance reform, ""Treasury"":http://www.treasury.gov/Pages/default.aspx and ""HUD"":http://portal.hud.gov/hudportal/HUD struggle to determine the best path forward for America's housing finance system.

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Speaking before an audience at a meeting of the ""American Real Estate and Urban Economics Association"":http://www.areuea.org/, Counselor to the Treasury Secretary for Housing Finance Michael Stegman explained that rather than answering the broader question of what the future of housing should look like, each proposal seems to ignite a slew of additional critical questions.

""[N]o matter how thoughtful any plan, the deeper you dig beneath its top-line description, try to understand all its inter-related parts and ask second- and third-level questions, one quickly realizes the challenges and complexities of the reform process, and sees a dulling of the bright lines among options,"" Stegman stated.

Stegman said all three of Treasury's proposals included a few common themes, including allowing

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private capital to serve as the primary source of mortgage financing, ensuring government support is ""transparent, explicit, and limited,"" and extending assistance to low- and moderate-income families through the ""Federal Housing Administration"":http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/fhahistory (FHA).

Outside of these broad principles, however, Treasury and policymakers must determine appropriate underwriting standards for a qualified mortgage, the amount of taxpayer exposure to FHA risk, a reasonable support structure for multifamily and rental properties, and suitable steps for preventing a concentration of mortgage-related risk among market participants.

Beyond these questions lie even narrower ones such as the viability of the 30-year fixed-rate, pre-payable mortgage.

Stegman stressed that ""if not properly constructed, any option for reform can create potential taxpayer exposure to the mortgage market.""

While focusing on the complexities of the decisions at hand, Stegman made no reference to when Treasury would release a plan.

However, as Treasury and Congress struggle to determine a path forward, some believe it is the mere uncertainty in the market that is currently holding it back.

Federal Reserve Secretary Governor Elizabeth A. Duke ""said"":https://themreport.com/articles/fed-governor-uncertainty-is-markets-greatest-hindrance-2012-05-16 in a recent speaking engagement, ""[U]ntil these tough decisions are made, uncertainties will continue to hinder access to credit, the evolution of the mortgage finance system, and the ultimate recovery in the housing market.""

""It's time to start choosing that path,"" she stated.