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White House Representative Speaks on Housing Finance Reform

""Speaking"":http://www.whitehouse.gov/sites/default/files/docs/sperling_remarks_-_urban_and_corelogic_symposium_-_11_20_2013_final.pdf at an industry symposium hosted by the ""Urban Institute"":http://www.urban.org and ""CoreLogic"":http://www.corelogic.com, Gene Sperling, director of the National Economic Council for the White House, outlined President Barack Obama's four major principles for housing finance reform.

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The four basic principles include:
* Enhancing the role of private capital in the market.
* Ending what the president refers to as the GSEs' ""heads we win, tails taxpayers lose"" model.
* Maintaining widespread access to the 30-year, fixed-rate mortgage.
* Making sure housing is affordable and accessible for rent and ownership.

Sperling stressed the importance of securitization in the housing market, saying it ""makes mortgages cheaper and enables banks to free up limited capital to support additional home purchases and other forms of lending.""

However, the current securitization market is in need of reform, he said. Sperling criticized the ""implicit government guarantee"" held by the GSEs. Instead, he calls

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for a government backstop, which would keep the market afloat only after private capital is exhausted.

A government guarantee at some level is ""critical to the functioning of the TBA market,"" according to Sperling, and the TBA market is essential to keeping the 30-year, fixed-rate mortgage alive and accessible.

In order to bring more private capital to the market, Sperling says it is important rules are clear and the system is fair.

""Private capital and new entrants will only come back if they are certain the system is not rigged where some competitors have an unfair advantage,"" he said.

While calling for changes, the president's core principles do maintain one of the most prevalent products in today's housing market: the 30-year, fixed-rate mortgage.

""[I]n a system where private capital is at the center, where there is no implicit guarantee, and where there is true market competition, there is still a role for a remote government backstop in order to preserve the 30-year fixed rate mortgage in good and bad economic times,"" Sperling said.

Keeping a 30-year, fixed-rate mortgage available is an important aspect of keeping homeownership accessible to responsible low- and moderate-income Americans, according to Sperling.

In addition to the major principles set forth by the president, Sperling said the government needs to maintain a countercyclical role in the housing industry to keep the market running in economic downturns.

Sperling insists Fannie and Freddie need to be reformed despite their recent returns to profits, and he says now is the time to do it.

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