The corporation would also be responsible for developing and modifying the Qualified Mortgage and Qualified Residential Mortgage standards (currently the CFPB's job) as well as setting seller and servicer qualification standards for all loans that obtain a federal guarantee. These pricing and policy responsibilities would enable the corporation to take decisive action to scale up during an emergency and systematically scale down when conditions stabilize.
All of these activities require a level of sophisticated risk management practices beyond the capabilities of today's FHA due to its status inside HUD. Funded by assessment fees (as a general and administrative portion of its guarantee fees), the new organization could recruit from existing FHA staff as well as Fannie Mae and Freddie Mac as these agencies are wound down. However, the new corporation would maintain a close relationship with HUD via the commission structure and hence a focus on affordable housing while ensuring appropriate pricing, policy and portfolio management capabilities are in place. Just as the often conflicting twin missions of the GSEs (profit maximization and affordable housing) contributed to their demise, the dual mission of affordable housing and maintaining stability in the MMI Fund requires a different approach.
Next: Multifamily finance reform.
Clifford V. Rossi is the Executive-in-Residence and Tyser Teaching Fellow at the Robert H. Smith School of Business at the University of Maryland.
