Page 18 - February 2018 Disruption Report Flip Book

FANNIE MAE AND FREDDIE MAC JAN.U-FAERBY. 2018
or eliminate whatever policy or political support the GSEs currently retain. See Section II and Appendix 2.
....FHFA’s roles: The steps we recommend above can be taken by FHFA as conservator (not as regulator) of the GSEs. With a new director taking over in January 2019, these policies may be promptly instituted. See Section VII.
Further, adoption of a housing finance reform proposal that would extend an explicit federal guarantee to the GSEs (including extending the Ginnie guarantee to GSE debt) would cause rates required on GSE debt to go down and rates on Ginnie debt to go up. See Section IX.
False Claims by Housing Lobby. Customarily, when the role of the GSEs is challenged, the Housing Lobby makes many false claims about the “disasters” that will result. We list and rebut each of these in Section X.
A Unique Plan. No other reform proposal creates a safer and more stable housing market, gets the taxpayer off the hook for losses, and provides substantial revenue to the Treasury. These and other accomplishments are listed in Section XI.
...Our suggestions for keeping FHA’s share at today’s current level, or even reducing it to below this level include:
1. As the GSEs’ high cost area and regular loan limits are reduced, parallel reductions should be made to the FHA’s high cost and regular loan limits.
2. Implement an Ability-to-Repay (total debt-to-income ratio or DTI) standard to the FHA that limits DTI to <43 percent, unless residual income test used, in which case DTI limit is 50 percent
3. Limit the maximum seller concession to 3 percent
4. Eliminate cash out refinances
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