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The White House on Housing: A Look Back and Ahead

White House BHAt two recent panel discussions at the Urban Institute [1], two groups of housing experts took a look back at the Obama Administration’s legacy on housing [2] and a look ahead at what the Trump Administration will bring [3].

When President Obama took office in 2009, “housing prices were in free fall, hundreds of thousands of jobs were being lost each month, and the lending industry was overwhelmed by a tidal wave of foreclosures,” Urban Wire wrote. The new administration was challenged with pumping credit into the housing market in the middle of a total collapse in credit, and it had limited resources to work with.

Phyllis Caldwell, former chief of the Homeownership Preservation Office at Treasury, said at the first panel last week that in the Troubled Asset Relief Program (TARP), the government “had a $50 billion program [and] $750 billion of negative equity in the system.”

That panel’s most singular conclusion about the Obama years was that the administration’s aggressive tactics saw the market reach bottom, but then saw the liquidity and insolvency crises reverse while home prices, negative equity, and foreclosures changed course. Still, the panel said, the biggest yet-to-be-resolved issues in housing are the fate of the GSEs and the fundamental question, “How do you get the most for Americans out of our current housing finance system?”

A second panel that met on Tuesday looked at where Republican leadership might take housing policy. Most notably, the speakers agreed on the importance of three issues: reforming the Federal Housing Administration [4], reforming Fannie Mae [5] and Freddie Mac [6], and addressing the affordable housing crisis in the rental market.

The panelists agreed that the current structure of the GSEs must change. However, the range of views as to what kind of change is in order reflected the diverse views held by pro-reformers in general [7].

Mark Calabria, director of financial regulation studies at the Cato Institute [8], said he would like to see government support for the system pulled back or withdrawn altogether, while Shawn Krause, EVP of Quicken Loans [9] and a member of the Trump Administration's HUD Transition Team, warned of the dangers of such a move and questioned whether private capital would step in without government support.

Despite any dissenting views on how to clean up the GSEs, the panel agreed that reforming the GSEs alone would not do enough to mitigate taxpayer risk. The FHA also must be part of any comprehensive reform effort. One solution is technology investment, Krause said.

“Systems go down for weeks at a time, so I believe [the FHA] needs more money for technology,” he said.

Several panelists said that it is time to authorize the FHA to use premium revenues to cover administrative expenses, even if premiums increase as a result.