On April 14, the House Committee on Financial Services held a hearing titled “Housing Finance-What Should the New System Be Able to Do?: Part II-Government and Stakeholder Perspectives”.  Among those providing testimony was Shaun Donovan, Secretary of the U.S. Department of Housing and Urban Development, and Anthony “Tuck” Reed, Executive Vice President of Capital Markets at SunTrust Mortgage, Inc., testifying on behalf of the Housing Policy Council of The Financial Services Roundtable.  Full Hearing Testimony.

Secretary Donovan’s testimony outlined the objectives that the Administration believes should be achieved by a stable and well-functioning housing finance market, including widely available mortgage credit, housing affordability, consumer protection, and financial stability through distribution of the credit and interest rate risk that results from mortgage lending. The Secretary went on to say that the Administration believes that any system that achieves these goals should be characterized by alignment of incentives for all actors, avoidance of privatized gains funded by public losses, strong regulation, standardization of mortgage products (with “room for innovations to develop new products”), support for affordable single-and multifamily-housing, a diversified investor base and sources of funding through securitization and other forms of intermediation, accurate and transparent pricing, secondary market liquidity, and clear mandates.  Secretary Donovan’s Testimony.

Mr. Reed’s testimony included a description of the Housing Policy Council’s proposal to revitalize the secondary mortgage market for conventional mortgage loans with the objectives of ensuring a steady flow of reasonably priced housing finance for borrowers without disrupting the economic recovery, minimizing risk to taxpayers, and ensuring a flow of funding to contribute to affordable housing. The Housing Policy Council proposal relies on private capital, a clear delineation of the roles of the private sector and the Federal Government in the securitization process, and the transfer of a stream of funding to affordable housing, all accompanied by strong federal regulation and oversight. Mr. Reed’s Testimony.