Federal Housing Finance Agency (FHFA) Acting Director Edward DeMarco and HUD Secretary Shaun Donovan spoke about the state of the housing market, foreclosure response, and the recently announced REO-to-rental pilot sale (see article elsewhere in Memo) at a Senate hearing and an event sponsored by the National Journal.
On February 28, the Senate Committee on Banking, Housing, and Urban Affairs held a hearing, “State of the Housing Market: Removing Barriers to Economic Recovery, Part II.” The witnesses were Mr. Demarco, Secretary Donovan, and Elizabeth Duke of the Board of Governors of the Federal Reserve System.
At the hearing, Mr. DeMarco said his view is that the role of FHFA is to minimize losses to taxpayers and that it is the role of Congress to further policy or other objectives. As such, policies such as the REO-to-rental pilot reflect this principle, although FHFA’s policy has been questioned by a number of members of Congress.
Senator Robert Menendez (D-NJ) said at the hearing that FHFA “needs to be more aggressive in responding to the foreclosure crisis” and that the government policies in response to the crisis should be used to promote affordable rentals “where it makes sense.”
On February 29, Mr. DeMarco and Secretary Donovan both spoke at an event hosted by the National Journal, “Underwater: Washington’s Role in Keeping American Homeowners Afloat.” At the event, which also featured Senators Johnny Isakson (R-GA) and Jeff Merkley (D-OR), participants discussed the REO-to-rental pilot, and government sponsored enterprise (GSE) reform, including legislation, S. 1963, sponsored by Senator Isakson. While all participants agreed that there is a great need for GSE reform, there was not much optimism for meaningful steps to be implemented in the near future.
REO-to-rental was also a significant topic of discussion at the National Journal event given the February 27 pilot sale announcement. While there was broad support for the initiative among participants, Senator Merkley suggested that the properties should be offered for sale to individual buyers at a discounted rate prior to them being sold to investors for conversion into rentals.
Part of the purpose of the REO-to-rental program is to address increased demand for rental housing in the wake of the foreclosure crisis. Secretary Donovan discussed the purpose of the program in his written testimony from the hearing on February 28, writing that, “with the purchase market continuing to be dragged down by the glut of vacant foreclosed properties and rental rates rising as those who lose their homes to foreclosure seek rental housing, there is an unprecedented imbalance of supply and demand between the purchase and rental markets.”
An archived webcast of the February 28 hearing and all witness testimony are available at http://1.usa.gov/xWBD6p
An archived webcast of the National Journal event is available at http://www.nationaljournal.com/events/event/85/