New Treasury Paper Emphasizes Importance of Housing Affordability

In a recent essay posted on Medium, Treasury officials, Antonio Weiss and Karen Dynan, offered what might be the Obama Administration’s closing thoughts on housing finance reform. The piece offers an approach to reform, wholly focused on ensuring access to credit and affordable rental housing for middle and low income Americans.

Weiss and Dynan begin by touching on concerns that in the current mortgage market, borrowers with poor credit scores go underserved. They highlight that the GSEs guarantee loans of borrowers with FICO scores as low as 620 “yet only 10 percent of all new mortgages originated across the industry are to borrowers with FICO scores below 665.” Reacting to these figures, the authors argue that “it is clear that the GSEs and the secondary market can do more to reach a broader swathe of creditworthy households.”

Some of the proposed solutions for dealing with the issue of underserved markets include cross subsidization through “average-cost pricing”, duty to serve requirements, and the development of national loss mitigation standards.

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