Industry Leader Endorses NAR’s Blueprint for Housing Finance Reform

October 22, 2019

Former Freddie Mac CEO Don Layton announced his retirement this summer, culminating a seven-year tenure atop one of the nation's largest mortgage companies. Layton told HousingWire last October that he accomplished his two primary goals as Freddie’s chief executive: “getting the company in shape” and participating as much as possible in housing reform.

Although he’s no longer overseeing Freddie’s day-to-day operations, Layton is still engaged in the conversation around housing finance reform. As a new senior industry fellow, he published a piece last week for the Harvard Joint Center for Housing Studies indicating that he believes the National Association of REALTORS®’ blueprint for housing finance reform has emerged as one of only two viable options remaining in the debate.

In February, NAR announced its vision for housing finance reform, proposing to transition Fannie Mae and Freddie Mac from their current structure to a privately owned utility model. The plan highlights competition and protects the 30-year fixed-rate mortgage while it rectifies some of the system shortcomings that exacerbated last decade’s financial crisis.

In his column, Layton states that NAR’s utility proposal eases the concerns of small- and medium-sized lenders who worried system reforms could result in the winding down of the two GSEs or feared the unintended consequences of replacing the GSEs with something new. “The regulated utility approach seemed very practical and common-sense in its way. Its proponents pointed out the very low risk of transition and its relatively easy implementation. Furthermore, because old problems had been successfully addressed, the risk of their reappearance was now felt to be much diminished, especially compared to the risks involved in some dramatic new approach, which could (and likely would?) start all over again the cycle of unintended consequences and politicization,” Layton writes.

Layton goes on to explain that NAR’s plan, along with the U.S. Treasury Department’s proposal unveiled in early September, are intertwined in their desire to strengthen the regulator and protect taxpayers. In all likelihood, he says, a hybrid of each proposal will ultimately prevail as the true path forward for the GSEs. “Those became today’s leading concepts for GSE reform—with both of them building upon the two GSEs,” Layton wrote of NAR and the Treasury Department’s respective proposals. “It represented the political rehabilitation of Freddie Mac and Fannie Mae to a degree never thought possible in 2009 through 2012.”

NAR President John Smaby said he was pleased to see NAR’s plan gain additional public recognition and underscored the motivation of securing a housing finance system that has American consumers’ best interests in mind. “Because of the GSEs, home buyers in Springfield, Mo., and Springfield, Mass., have equal access to a mortgage and pay nearly identical rates,” Smaby said. “REALTORS® believe that responsible, creditworthy home buyers should never pay more for or be unable to secure a mortgage simply because of where they live, and that is the ultimate mission of our housing finance system.”