The next administration in the White House must act swiftly to move reform of Fannie Mae and Freddie Mac off dead center, according to two key housing advisors in the Obama administration.
But Ginnie Mae President Ted Tozer suggested that the model for a new secondary market is already in place.
"The thing the GSEs are trying to build, we have today" at Ginnie Mae, Tozer told a crowd of nearly 1,000 at a summit the agency is hosting this week. "It's the Washington way — try to build what we already have."
In the opening session, Jim Parrott, who severed several years as a senior advisor at the National Economic Council, where he led a team charged with counseling President Obama and his cabinet on housing issues, said the impetus for GSE reform "has got to come from leadership."
"It will take leadership" to make sure reform "is coherent so there is not some monumental waste of effort," he said.
Michael Stegman, who followed Parrott as senior policy advisor on the NEC, agreed, saying that the new administration "has to view reform as an actual issue."
Noting that homeownership is "still a major stepping stone to the middle class," Stegman said the housing finance system "has to adjust to the new realities" of the market, and the sooner, the better.
"The issues are so complex with so many stakeholders and so many interests that without strong leadership, reform is not going to go anywhere," he said.
Parrott, who is now a senior fellow at the Urban Institute, suggested that reform should be undertaken in a two-pronged approach — one near-term step that identifies what is working now and a second step a few years later so "we can talk intelligently about what needs to be fixed."
His proposal, he said, "will allow for a much more intelligent discussion within a broader framework." There has to be a "long conversation," he said. Otherwise, the system will "remain stuck in limbo and the conversation will remain frozen."
Parrott described his plan as a "much more humble way to think about reform. It's a lot less scary and we’re a lot less likely to screw it up."
Kicking off Ginnie Mae's largest conference ever, including delegations from China, Japan, Korea and Taiwan, Tozer said that for the most part, his agency is "now the industry."
"Credit access wouldn't be close to what it is today without Ginnie Mae," he said. "We led the housing market out of its malaise."
Eight years ago, he noted, Ginnie Mae had a 5% share of the mortgage-backed securities market. Today, it has a third of the MBS market, issuing more than Freddie Mac, all with a staff of 140, "each doing the work of four people."
Ginnie has $1.7 trillion in outstanding securities totaling 10 million loans, Tozer also reported. And as "the second largest issuer," it has this year put out a record $468 billion in MBS on the books through August.
"We are supporting housing," he declared. And despite the notion that Ginnie Mae's work is not scalable, he added, "our system has a tremendous amount of capacity. It can really work. The only reason it handles only government loans is because of our charter, not because of our programs."
