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An Update on Community Lenders and Housing Finance Reform

December 10, 2014

Looking Ahead: Community Lenders and Housing Finance Reform

While Congress made progress on housing finance reform during 2014, the long term future of the GSEs and the housing finance system remains unresolved. Few political observers expect enactment of reform legislation during 2015-16. In part this is because there are more urgent matters on Congress’s agenda, and the 2016 Presidential election looms on the horizon. Additionally, fundamental disagreements about the structure of a reformed housing finance system remain, including the existence/extent of a government guarantee and what, if any, affordable housing obligations should exist.

However, community lenders have reason to be encouraged by some areas of progress in the reform debate. During the past couple of years, a bipartisan consensus has emerged on ensuring that community lenders remain fully viable in a reformed housing finance system. While there are some differences of opinion on how to achieve this, no one disputes that lenders of all sizes should have full and equal access to the secondary market.

There also are indications of an emerging bipartisan consensus that Congress needs to provide community lenders with regulatory relief. This reflects widespread recognition that community lenders have been particularly hard hit by the substantial increase in mortgage regulation resulting from the housing boom and crash of the previous decade. Many observers believe Congress next year is likely to focus on enacting such relief and other issues on which bipartisan agreement can be achieved, while continuing to deliberate on long-term reform. Stay tuned for more news in the months ahead.

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