President Obama's two top economic advisers endorsed a pivot to easier mortgage credit terms Wednesday morning, writing a CNN Money op-ed endorsing federal agencies' plans to boost mortgage availability, including through the bailed-out government-sponsored enterprises Fannie Mae and Freddie Mac.
Jason Furman, chairman of the Council of Economic Advisers, and Jeff Zients, director of the National Economic Council, praised the directors of regulatory agencies for taking "important steps last week to ensure that more responsible, creditworthy families can obtain a loan when they're ready and prepared to buy a home."
The article is the clearest statement yet of the White House's intentions for addressing the nation's housing finance system in the wake of its collapse six years ago. For the most part, President Obama has left it to Congress and the regulatory agencies to direct the course of Fannie and Freddie and plan for a new system of housing finance.
Last week, Mel Watt, Obama's new appointee to head the Federal Housing Finance Agency, the government conservator of Fannie and Freddie, announced a shift in policy toward aimed at promoting the availability of home loans. For five years before Watt took office, his predecessor, the fiscally conservative acting director Ed DeMarco, had tried to shrink the GSEs' market footprint and decrease the risk the companies posed to taxpayers.
The Federal Housing Administration, which insures home loans for low-income buyers, also last week outlined steps aimed at broadening mortgage access.
Furman and Zients described the FHFA and FHA's announcements as responding to the "perceived lack of clarity by lenders about how mortgage guarantees will be treated," which "has made them more cautious in lending to eligible borrowers with credit histories that are anything less than perfect." They also described the moves as actions that would strengthen the housing market and the economic recovery.
While affirming an "active and robust interim role" for Fannie and Freddie in promoting a housing recovery, the two economic advisers also said a legislative resolution to their status remains "essential."
They also gave a vote of confidence to the reform bill advanced by the Senate Banking Committee last week. That legislation, sponsored by committee Chairman Tim Johnson, D-S.D., and ranking member Mike Crapo, R-Idaho, would gradually phase out Fannie and Freddie and replace them with a system of private capital for insuring home loans, backed by a government guarantee. Separately, Republicans on the House Financial Services Committee last year passed a bill that would wind down the GSEs, but would not include a government backstop for mortgages. Both bills face slim odds of being taken up in their respective chambers.
Furman and Zients praised the Johnson-Crapo bill as a "strong bipartisan foundation to complete a major piece of unfinished business from the financial crisis," and said that they would continue to work with the Senate.