Housing Regulator to Revamp US Mortgage Market

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The Biden administration is close to announcing the nomination of a key regulator with broad powers to change the $11 trillion mortgage market and reshape the American dream of homeownership. The administration has narrowed down the candidates to run the Federal Housing Finance Agency, or FHFA. While not a household name, the agency has enormous power because it controls Fannie Mae and Freddie Mac, the two entities at the heart of the mortgage market. They largely decide who can qualify for a home loan and at what cost. And because of rules put in place after the Great Recession, the head of the FHFA has almost unilateral control to direct Fannie and Freddie to change policies or launch new initiatives. It's never certain how nominations will play out. But for now, two leading contenders for the job are Sandra Thompson, now the FHFA's acting director, and Mike Calhoun, the president of the nonprofit Center for Responsible Lending. Before joining the FHFA, Thompson spent decades in government, including as a banking regulator with the Federal Deposit Insurance Corp. There she worked on risk management and consumer protection. Calhoun likewise has decades of experience, but more as an outside watchdog pushing for change and focused on expanding opportunities for homeownership through Fannie and Freddie. Revamping mortgages and making it easier for renters to become homeowners Whoever gets the job as director of the FHFA is going to have some powerful levers they can pull to reshape homeownership, which is the most common way Americans build wealth over their lifetimes. Many housing economists would like to see the agency pave the way for more alternatives to the 30-year mortgage. It's a vestige of an era when people used to stay in their homes much longer and could build equity and wealth with a 30-year loan. These days, people tend to move and sell their home more often. A 15- or 20-year loan allows homeowners to pay less interest and build up a lot more equity and wealth in their homes before they sell. However, 15- and 20-year loans have higher payments. But Fannie and Freddie could be directed to bring those costs way down to help people get into a type of loan that helps them build wealth more quickly. Many advocates also want to see the FHFA tackle racial disparities in homeownership, which are as bad as they've been in decades. "The African-American homeownership rate is really where we were in the 1960s when the Fair Housing Act was erected," says Andre Perry, a senior fellow with the Brookings Institution who studies assets in Black majority cities.