MBA's Stevens slams calls to 'recap and release' GSEs

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Mortgage Bankers Association President and CEO David Stevens is confident that housing finance reform will move forward under the Trump administration, but criticized calls to simply let the government-sponsored enterprises recapitalize and be returned to shareholders without additional reforms.

"Recap and release is more like rewind and repeat. It would return the GSEs to their previous state without safeguards to ensure the positive progress during conservatorship remains and without any guarantee the agencies will operate in a manner that protects the taxpayer going forward," Stevens said at the group's National Secondary Market Conference in New York. Instead, recapitalization "lines the pockets of a select few."

The MBA recently published a proposal calling for Fannie Mae and Freddie Mac to receive new charters and opens the door for other guarantors to enter the mortgage-backed securities market. MBS issued by guarantors would carry an explicit guarantee backed by the Treasury Department to insure timely payment of principal and interest to MBS investors.

The MBA has generally supported regulatory reform efforts, including meeting with members of the Trump administration and testifying before Congress. The group "believes in good regulation," but there needs to be "the right balance of consumer protection, industry supervision and enforcement," Stevens said.

It might be some time before there is discussion of government-sponsored enterprise reform, as it is third on the list behind tax reform efforts and regulatory reform. However, Stevens warned that housing should not be used as "a political football" by the government in its various reform efforts.

There needs to be a level playing field where small and large lenders have equal access to the secondary market, Stevens said. Recapitalization supporters have argued this could be accomplished through a federal regulator, like the Federal Housing Finance Agency.

However, in the current structure, the FHFA director has a finite term and with changing administrations could be replaced by someone with diametrically opposite views, Stevens said, adding a lender's business should not be subject to the whims of the next regulator.

"Housing is not a political issue. Housing is an economic issue," Stevens said.

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GSE reform Law and regulation Enforcement Housing FHFA Mortgage Bankers Association Fannie Mae Freddie Mac
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