The chairman-elect of the Mortgage Bankers Association told members of the Senate Banking Committee today that policymakers must develop a long-term plan for government's role in financing multifamily housing.  E.J. Burke testified before a hearing today titled "Housing Finance Reform:  Essential Elements of the Multifamily Housing Finance System." 

Burke pointed to the strong credit performance of government backed multifamily loans, even though the recent financial crisis.  The recent downturn, he said, demonstrated the countercyclical role as one that only the government can fill.  But with the federal conservatorship of Freddie Mac and Fannie Mae now lasting more than five years it is clear that, while the current situation cannot last indefinitely, "policy makers should ensure the ongoing stewardship of valuable resources that support the multifamily market and utilize them to transition to a stronger housing finance system."

He called the multifamily rental market a critical component of our housing system, in size, reach, and the households that it serves.  More than one in three American households rent, he said, and more than 16 million of those households live in multifamily rental housing.

 "As the Committee considers the structure of the multifamily housing finance system," Burke said, "we believe that policy makers should focus on ensuring the availability of capital in all market cycles.  MBA believes that public policy should strike a balance that continues to attract and deploy private capital in the multifamily market, while establishing a focused government guarantee that enables liquidity and stability in all markets and all economic cycles."

A new system should incorporate several structural recommendations including a wholly-owned government corporation functioning as a catastrophic guarantor, administrator of a risk insurance fund, and regulator of the secondary market.  The guarantor would be funded by fees paid by issuers.  The new system should also allow multiple, privately-capitalized issuers of government-guaranteed securities into the secondary multifamily mortgage market.

The existing multifamily assets of Fannie and Freddie and their infrastructure should be preserved and carried over to the new system to preserve their value to taxpayers and minimize market disruption, he said.

Burke said MBA believes that proposed approaches should also be reasonable, flexible, and balanced with regard to the need to attract private capital.