Trump directs Treasury, HUD to develop GSE reform plan
WASHINGTON — President Trump is directing his administration to develop a housing finance reform plan with the aim of ending the conservatorships of Fannie Mae and Freddie Mac and boosting homeownership.
Trump was slated to sign a memo Wednesday asking the Treasury Department and the Department of Housing and Urban Development to draft both administrative and legislative reform options and deliver their reports to the president “as soon as practicable.”
Treasury will craft a plan for reforming Fannie and Freddie, while HUD will form a proposal for reform of the housing finance agencies it oversees, including the Federal Housing Administration.
The White House announced the directive on the same day the Senate Banking Committee held the second of two hearings on housing finance reform plans.
Although Trump is requesting that the two departments prepare both administrative and legislative solutions for the government-sponsored enterprises, “critically, the administration wants to work with Congress to achieve comprehensive reform that improves our housing finance system,” the White House said in a press release.
“We’re lifting up forgotten communities, creating exciting new opportunities, and helping every American find their path to the American Dream — the dream of a great job, a safe home, and a better life for their children,” Trump said in a statement.
The memo notably aims to preserve the 30-year fixed-rate mortgage, a fixture of the current housing finance system lauded by both Democrats and Republicans.
The Trump administration is also seeking to promote competition in the mortgage market, create sustainable homeownership options and protect taxpayers from future bailouts, the White House said. Sustainable homeownership is the “benchmark of success” for reform, according to the press release.
The memo said a reformed system should maintain "equal access to the Federal housing finance system for lenders of all sizes, charter types, and geographic locations, including the maintenance of a cash window for loan sales."
The memo also directs officials to evaluate the regulatory exemption for GSE-backed loans from the Consumer Financial Protection Bureau's "Qualified Mortgage" underwriting rules. That exemption, known as the QM Patch, expires in 2021.
Treasury and HUD, meanwhile, "must specify whether the proposed reform is a 'legislative' reform that would require congressional action or an 'administrative' reform that could be implemented without congressional action," the memo said. For administrative reforms, the report should include a timeline for implementation.
The memo comes as the administration’s nominee to serve as director of the Federal Housing Finance Agency — Mark Calabria — awaits Senate confirmation.
Acting FHFA Director Joseph Otting reportedly told agency staff in January that the Trump administration was preparing to release a plan that would set a direction for the future of housing finance in the U.S., which sparked concerns that the White House might move alone on reform instead of letting Congress take the lead.
But the White House has pushed back on speculation that it would go it alone. According to published reports, a White House spokesperson acknowledged in January that while the administration was preparing to release a housing finance framework shortly, officials were still looking to work with Congress on a comprehensive plan.