"NAR believes that we cannot have a restoration of the former secondary mortgage market with entities that took private profits while pushing losses onto the taxpayer," said NAR President Ron Phipps, broker-president of Phipps Realty in Warwick, R.I. "The new system must involve some government presence, outside of FHA, USDA, and the Department of Veterans Affairs, to ensure a continued flow of capital to housing markets during economic downturns when large lenders flee the housing market."
"As the leading advocate for home ownership, NAR recognizes that the existing system failed and that changes are needed to protect taxpayers from an open-ended bailout," Phipps added. "We believe there must be a certain level of government participation to provide middle-class families access to affordable mortgages at all times and in all markets."
A system that is dominated by a few large banks that are "too-big-to-fail" would inevitably involve huge taxpayer risk of another bailout, according to Phipps.
"An efficient and adequately regulated secondary mortgage market must make available to consumers simple yet safe, reliable mortgage products like the 15- and 30-year fixed-rate mortgages," he said.
The NAR president said he believes that the size of the government's participation in housing finance should decrease if the market is to function properly, but noted that when private capital fled the marketplace during the recent financial crisis, government backing of residential mortgages was critical in sustaining the housing market.
"Without government support, the financial crisis could have been far worse," Phipps said.
NAR's economists estimated that a retreat of capital from the housing market would negatively impact the economy because for every 1,000 home sales, 500 jobs are created in the country.
NAR representatives are encouraging private sector participation in less traditional mortgages in innovative ways, such as through covered bonds. NAR, however, is opposing raising fees for current well-qualified consumers to cover losses stemming from mistakes made in the private business decisions of the former Fannie Mae and Freddie Mac.
"Reducing the government's involvement in the mortgage finance market is necessary for a healthy market but should not be done at the expense of the economy or homebuyers," said Phipps. "Any proposal for increasing fees and borrowing costs beyond actuarially sound levels will only make it harder for working, middle-class individuals to achieve home ownership, and only the wealthy will be able to achieve the American dream.
"We welcome the administration's desire to engage stakeholders in the final plan and we want to serve on any advisory panel that will study the consolidation of federal incentives for housing."