While reform of the government-sponsored enterprises is expected by many, changes to the Federal Housing Administration are expected more quickly.
Republicans’ seizure of power in the House, Senate and White House has created a new political landscape that will impact the U.S. housing market.
But industry experts see targeted legislative and regulatory changes as more likely than large-scale reforms –though the current environment is unpredictable.
That is according to Moody’s Investors Service, which drew its conclusions from panelists and attendees at its US Housing and Housing Finance Conference.
In a report, the ratings agency
said that an increased focus on the potential for GSE reform is the result of key policymaking stakeholders such as Treasury Secretary Steven Mnuchin, Senator Mike Crapo (R-Idaho) and Rep. Jeb Hensarling (R-Texas) who appear to seriously consider it a priority.
Fewer than 5 percent of conference attendees expect comprehensive GSE reform over the next 12 months, while around 5 percent expect it by the midterm elections, and nearly half anticipate it will occur by the end of the presidential term. Another 30 percent predicted GSE reform in the next presidential term, and less than 15 percent don’t see it happening in the next decade.
Among conference panelists, however, GSE reform is not expected anytime soon. Moody’s shares their view.
Among the roadblocks to GSE reform are competing policy priorities for the GOP such as health-care reform, tax reform and infrastructure spending. Also holding up reform is the need to confirm individuals for key Treasury posts and the complexity of the Mammoth task.
“Nevertheless, panelists did see better odds of smaller legislative and/or regulatory GSE changes over the near term, potentially after a failed attempt at broad legislative reforms,” Moody’s wrote. “Those would likely build on previous work by Federal Housing Finance Agency and the GSEs aimed at advancing the market toward its future state, addressing areas such as the GSEs’ credit-risk transfer programs and the common securitization platform that they are building.”
The ratings agency noted that there was a consensus that changes to FHA are more likely in the near term.
In particular, some type of regulatory and enforcement relief geared toward stimulating FHA activity is likely in order to offset the reluctance of firms that have become wary of FHA lending following penalties incurred under False Claims Act actions frequently used by the Justice Department in recent years.