Roundtable: Whither FHA and Housing Finance for Lower Income Households
(Housing & Community Development)

Friday, November 9, 2012: 1:00 PM-2:30 PM
International E (Sheraton Baltimore City Center Hotel)

*Names in bold indicate Presenter

Organizers:  Mark Willis, NYU Furman Center for Real Estate and Urban Policy
Speakers:  Sarah Wartell, Urban Institute, Robert Van Order, George Washington University, William C. Apgar, Joint Center for Housing Studies, Harvar and John Weicher, Hudson Institute
Moderators:  Mark Willis, NYU Furman Center for Real Estate and Urban Policy

The Roundtable offers an opportunity to engage a larger audience on what role the Federal Housing Administration should play in the national housing finance system going forward. This is a topic of critical importance to ensure that affordable housing is available at all income levels. Helping to motivate this discussion will be a panel of experts with deep experience and knowledge of the FHA (note: all are available on Friday the 9th). While most, if not all, of the current proposals for reform of the housing finance system contemplate the FHA’s continued involvement in both the single-family and multifamily housing markets, they fail to grapple in any detail with three key issues: what part or parts of the housing market should it serve, how should it serve them, and what structural and organizational changes might be appropriate to increase its efficiency and effectiveness (e.g., should it be transformed into a wholly owned government corporation). Supporters of the continuation of the FHA generally acknowledge that it plays an important role in the provision of housing affordable to lower income families and households. They also acknowledge the critical counter-cyclical role the FHA played when mortgage originations that relied solely on the private sector all but disappeared with the onset of the financial crisis and the decline in housing prices (when the private sector withdrew, the FHA scaled up to undergird over half of the purchased-money mortgage market). Others also see support for the continued existence of the FHA as an excuse to free the private sector from any obligation to serve the lower income housing market. For some, this point of view is motivated by a belief that it was too much to expect private sector corporations such as Fannie Mae and Freddie Mac to be able to address simultaneously both a profit making mission and a social one. Similarly motivated by the experience with Fannie and Freddie is a desire to have any subsidies explicitly recognized on the federal budget, unlike the case where there was no explicit backing by the government of Fannie Mae and Freddie Mac and yet, in the end, the taxpayers were left holding the bag. The Roundtable will examine such important details as: Should the caps on the size of mortgages that the FHA can insure be brought back down to pre-crisis levels? Are there additional or alternative ways to limit FHA’s market share? How should we deal with the tradeoffs inherent in trying to expand access to mortgage financing and the assumption of risks that could either drive the insurance fee too high or require a government subsidy (it is interesting to note that, to date, the FHA has been self-funding and has not needed taxpayer assistance)? How broad a market should the FHA be allowed to serve in order to maintain the solvency of its insurance fund? Would a different type of organizational structure and legislative oversight allow it to be more responsive to the needs and opportunities in the marketplace? Etc.

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