A National Association of Home Builder (NAHB) task force on housing finance has recommended that the politically powerful organization adopt a policy blueprint that calls for a sharing of the interest rate and credit risk by the private sector institutions which benefit from the government's secondary market support.
The task force, which was established by the NAHB's senior officers last fall, also recommends that Fannie Mae and Freddie Mac retain their federal backing but be limited primarily to providing credit enhancements for MBS.
The sharing concept would be a "cooperative structure" loosely based on the Federal Home Loan Bank model, according to Chellie Hamecs, assistant staff vice president for housing finance. Under the proposal, lenders would be liable for a "significant portion of the risk" in direct proportion to the volume of loans they sell to the government-sponsored enterprises.
As envisioned by the task force, Fannie and Freddie would be given only limited portfolio capacity and then only to accommodate mortgages and housing-related investments that have no other secondary market outlet.
The report, which is being discussed at the NAHB's annual convention in Las Vegas, noted "serious structural problems" with the nation's housing finance system, including what it called "the inherent conflict" in the current Fannie-Freddie business model in which the companies are required to pursue a public mission while providing competitive returns to private stockholders. These and several other policy recommendations must pass through several committees before they are voted on by the NAHB's board.