Mel Watt, new director of the Federal Housing Finance Agency, delivered a policy address today at Brookings in an event hosted by the Economic Studies Program. Director Watt spoke on managing Fannie Mae and Freddie Mac in the present and the 2014 strategic plan for agency.
“In making decisions about the future strategic direction of the [Government-supported] Enterprise conservatorships,” Director Watt said, “the principle we are following is how best to fulfill our current obligations under current law.”
This means, first and foremost, that we must ensure that Fannie Mae and Freddie Mac operate in a safe and sound manner. It means that we’ll work to preserve and conserve Fannie’s and Freddie’s assets. And it means that we’ll work to ensure a liquid and efficient national housing finance market. Our job at FHFA is to balance these obligations. …
Another way of stating the principle that will be guiding us is that FHFA is focused on how we manage the present – the present conservatorships of the Enterprises and the present housing finance market under the present statutory mandates.
Let me say that again, the role of FHFA is to manage Fannie and Freddie in the present, under current statutory mandates.
As a result, one topic that is not on FHFA’s agenda, because it’s not part of our statutory mandate, is housing finance reform legislation. … I am well aware, and regularly express my belief, that conservatorship should never be viewed as permanent condition or as a desirable end state and that housing finance reform is necessary. However, Congress and the Administration have the important job of deciding on housing finance reform legislation, not FHFA. Instead, our task is to continue to fulfill our statutory mandates, to execute our Strategic Plan and to manage the present status of Fannie and Freddie.
Director Watt outlined three strategic goals:
- Strategic Goal 1: MAINTAIN, in a safe and sound manner, foreclosure prevention activities and credit availability for new and refinanced mortgages to foster liquid, efficient, competitive and resilient national housing finance markets.
- Strategic Goal 2: REDUCE taxpayer risk through increasing the role of private capital in the mortgage market.
- Strategic Goal 3: BUILD a new single-family securitization infrastructure for use by the Enterprises and adaptable for use by other participants in the secondary market in the future.
More details on each of these are contained in the director’s prepared remarks; event audio is also available.
When asked by Ted Gayer, vice president and director of Economic Studies, during the Q&A session whether he has the authority to end conservatorship over Fannie Mae and Freddie Mac, Director Watt responded:
Well clearly we have the authority to end the conservatorship. It’s in the statute. The statute gave us the authority to start it and it goes with that the authority to end it. But the alternatives would not be desirable alternatives. So, I think our role, and the reason we work so hard in the current space, is to make sure that we have a solid plan for continuing the operations of Fannie and Freddie, and the Federal Home Loan Banks, so that there will be liquidity and efficiency in the housing market; and that we continue to operate as we have operated without interrupting housing finance in this country, because housing finance is such a critical part of the economy. To stop, or stand in place, just simply is not an option. We’ll continue it and I think our goals are consistent with continuing the operation of Fannie and Freddie in the here and the now and we’ll do that until there is legislation passed.
Watt’s keynote address was followed by a panel of housing and consumer experts to discuss the state of the housing market, the role of GSEs in it, and the current reforms pending in Congress. Wall Street Journal reporter Nick Timiraos moderated the panel.
Listen to audio here or from the event’s page, where additional videos are available.