WASHINGTON (10/8/14)--Twenty-first century developments in the single-family housing finance market have led to a "significant" increase in the federal government's role in that market, according to a new report released by the Government Accountability Office (GAO).
In 2006, Federal Housing Administration and Department of Veterans Affairs and Agriculture loans were at 3% of the market, down from 11% in 2000, while mortgages guaranteed by Freddie Mac and Fannie Mae were 27% of the market, down from 36% in 2000. By 2013, those numbers had grown to 20% and 61%, respectively.
The result was that the federal government was providing direct or indirect support for 81% of the value of all new mortgages in 2013. This revealed or led to weaknesses in the housing finance system including "misaligned incentives, an overall lack of reliable information or transparency and excessive risk taking," according to the GAO report.
According to the GAO, limitations in federal oversight of housing market participants exacerbated these weaknesses, though Congress has taken some steps designed to address these limitations.
GAO has identified the federal role in housing finance as a high-risk area and provides in its report a framework to help assess proposed changes in the housing finance system.
The nine-point framework includes:
According to the GAO, the framework should help reveal relative strengths and weaknesses of any proposal for change in the housing finance system, identify likely trade-offs among competing goals and policies, set a foundation for new proposals and help policymakers understand risks associated with the transition to a new housing finance system.
The Credit Union National Association was one of the groups that the GAO spoke to while preparing the report. CUNA has also met with members of Congress and testified twice before the Senate Banking Committee in support of housing reform.
"CUNA has worked with Congress and regulators to make sure that any new housing finance system works for credit unions and treats both large and small institutions on equitable terms," said Robin Cook, CUNA's assistant general counsel for regulatory affairs.
Use the resource link below to access the full report.