Getting housing finance reform right

While sensible reforms to the secondary mortgage market are warranted and necessary, Congress should recognize that moving too quickly in winding down Fannie and Freddie will not only breed additional uncertainty in the still struggling housing market, but could prevent taxpayers from recouping funds injected into Fannie and Freddie when the housing market soured and Uncle Sam came to the rescue.

Just last week Freddie reported its first quarterly gain in nearly two years while keeping up with regular dividend payments to Treasury now totaling $11.6 billion. Although the housing market is still fragile, and this gain barely scratches the surface of the amount needed to make taxpayers whole, this news should at least prompt lawmakers to consider reform options that will allow the taxpayer to reap the benefit of future performance from the loans on Fannie and Freddie’s books today.

An additional element of protecting taxpayers is ensuring that a healthy and viable secondary mortgage market is maintained in the short-and long-term. A healthy secondary market means an environment where all credit worthy Americans, no matter the asset size of their financial institution, can achieve homeownership. 

Credit unions didn’t contribute to the financial crisis and pride themselves in solid underwriting that creates high quality loans. Any future housing finance system should recognize the past performance of credit unions and other community-based financial institutions by ensuring they can still effectively meet the needs of their members. 

This is a highly complex issue that should be done right rather than quickly. Fannie and Freddie own or guarantee about half of all mortgages in the United States, and any piecemeal congressional action could have serious unintended consequences for current and prospective homeowners. Congress must work in a deliberative way and look at all aspects of federal housing finance policy before moving forward.

Fred R. Becker is the president of the National Association of Federal Credit Unions.