By: Joe Adler
June 8, 2010
WASHINGTON - Federal Deposit Insurance Corp. Chairman Sheila Bair called on policymakers to review decades of housing policy that pushed homeownership to unsustainable levels while providing far fewer resources for rental housing.
In remarks Monday, Bair also signaled that the agency is readying its first securitization deals for loans from failed banks.
Speaking to a Washington-area affordable-housing group, Bair said the government should reexamine 25 years of policies that helped stimulate a 69% homeownership rate. "That's a level that ultimately proved unsustainable, and that may not be reached again for many years, if ever," Bair said at the meeting of the Housing Association of Non-Profit Developers.
Those policies included, she said, multiple tax deductions related to homeownership; risky growth of the government-sponsored enterprises, which "have required large federal subsidies to cover their losses in the crisis"; and "private securitization practices that turned out to be seriously flawed."
Bair said the effect arguably helped push up home prices, making purchases less affordable to lower-income families.
"Sustainable homeownership is a worthy national goal," she said. "But it should not be pursued to excess when there are other, equally worthy solutions that help meet the needs of people for whom homeownership may not be the right answer."
Bair said home-sale subsidies have far exceeded the subsidies available for affordable rental housing. She stopped short of calling directly for rent subsidies but said more attention should be devoted to the disparity. "I'm advocating an awareness of, I believe, how skewed government supports are," she said. "I'm not advocating any specific reduction in one area, and increasing the other area. All I'm suggesting is that we need to be aware that a lot more support is given ... to homeownership than it is to rental housing."
As her agency continues to work through piles of bad loans from failed banks, Bair indicated it is close to carrying through on a stated plan to securitize failed-bank assets. In an interview after her remarks, she said the agency hopes to complete its first securitization of commercial real estate loans within the next two months. The deals would be intended to serve as a "best practices" model to help guide a return of the securitization market. "At least in terms of disclosure, the simplification of the structure and servicing agreements... we can set some good standards going forward."