Congress ought to reform the nation’s housing finance system before a favorable opportunity closes in the next few months, Rep. Jeb Hensarling (R-TX) said today in a discussion of approaches, including his own PATH Act.
The time is ripe to change “this unsustainable, unconscionable, and unfair system” by ushering in privately financed housing and phasing out Fannie Mae and Freddie Mac over five to seven years while “right-sizing” the Federal Housing Administration (FHA), Hensarling said at the all-day Conservative Policy Summit convened at The Heritage Foundation by its political action arm, Heritage Action for America.
“If this doesn’t get done in the next several months’ the window will probably pass,” at least in this Congress, Hensarling said.
Like Heritage researchers, he concluded that eliminating the government-sponsored enterprises (GSEs) known as Fannie and Freddie —and their guarantees—would have little adverse effect on the overall economy and in fact likely would improve it.
“We all know that affordable housing is not spelled G-S-E but J-O-B,” Hensarling said.
The alternative vision of the PATH Act (Protecting American Taxpayers and Homeowners), he said, is to emphasize private capital and market discipline; define and limit the role of the state; remove artificial barriers to private capital; set down clear rules for market players; and give consumers options for mortgage products.
“Neither a bankrupt FHA nor a bankrupt America helps anyone,” said Hensarling, chairman of the House Financial Services Committee, noting that taxpayers remain on the hook for $5 trillion in mortgage guarantees.
After decades of government intervention, today’s homeownership rate of 65 percent is little different that it was in the late 1960s, Heritage Action CEO Mike Needham said in introducing Hensarling at the policy summit — which is streaming from Heritage Action’s website until its conclusion at 6 p.m.
The United States is practically alone in the use of GSEs to prop up housing finance, Hensarling said, but also leads in foreclosure rates – “subsidizing more so that we get less.”
This story was produced by The Foundry’s news team. Nothing here should be construed as necessarily reflecting the views of The Heritage Foundation.