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Cmte Financial Services (R)
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Subcommittee Meets to Continue Assessment of Sustainable Housing Finance

Washington, Dec 6 -

The Housing and Insurance Subcommittee held a hearing today to continue assessing views and perspectives on comprehensive housing finance reform.

“Today was an important step towards reforming our housing finance system, credit enhancement, and credit risk transfers,” said Subcommittee Chairman Sean Duffy (R-WI). “Expansion of private sector capital into the housing finance system should be a key goal in any restructuring of the system. We’ve seen how successful these products have been in offloading risk in recent years and the federal government has engaged in these products and programs to some extent.

“It’s important that we investigate further how reinsurance already plays, and can play an increased role, in offloading risk in the housing market. As with any private sector capital product, we must look at the availability of coverage, or capacity, and the impact of cyclicality on these products. While I believe these products will ultimately help bring in capital to the housing finance system, we must make sure taxpayers are protected and not left holding the bag in economic down cycles.”

Key Takeaways

• America deserves a better housing finance system – one that’s designed for homeowners and taxpayers where every American works hard and plays by the rules so that they can have opportunities and make choices to buy a home they can actually afford to keep.

• America needs a housing policy that is sustainable over time, not one that causes endless boom-bust cycles in real estate that harm our economy.

• Reforming the housing finance system would ensure equal market access for lenders of all sizes and business models, allowing for more competitive prices to occur.

Topline Quotes from Witnesses

“The GSEs, as required by their regulator, have started reducing their credit exposure further through various structures including the Credit Risk Transfer securities. From a GSE and taxpayer perspective, the creation of the CRT market introduces a layer of private capital cushion that didn’t exist before.” – Michael S. Canter, Director, US Multi-Sector and Securitized Assets, Alliance Bernstein L.P.

“In the last five years the GSEs have undergone major reform. ... These reforms, together with increased transparency, have been vital to improving the loan manufacturing process and making credit risk transfer possible.” – Jeffrey N. Krohn, Managing Director, Guy Carpenter & Company, LLC

“The evolution of the US housing finance market calls for a significant increase in the volume of private capital as well as access to additional diverse sources of capital that provide first loss coverage on mortgage credit risk. Equally as necessary, the solution should reduce taxpayer risk, lower cost to all borrowers and reduce operational costs for lenders, large and small alike.” – Andrew Rippert, Chief Executive Officer, Global Mortgage Group, Arch Capital Group, Ltd.

“Gains that have been made in protecting consumers and the markets, should not be lost.” – Patrick Sinks, Chief Executive Officer, Mortgage Guaranty Insurance Corporation, on behalf of the U.S. Mortgage Insurers