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Prepared Remarks of Dr. Mark A. Calabria, Director of FHFA, at National Association of Homebuilders International Builders' Show


​​​​Remarks As Prepared for Delivery

Dr. Mark A. Calabria, Director

Federal Housing Finance Agency



THUR., JANUARY 23, 2020, 10:40 AM – 10:50 AM PST




Thank you, Jerry, for that introduction. You are the face of NAHB to many of us. America’s home builders are stronger thanks to your leadership.

Let me congratulate all the exhibitors at this great event. And thank you to our host – the National Association of Home Builders. 

I would also like to thank the Home Builders for letting me share the stage with the Secretary of Housing and Urban Development, Dr. Ben Carson. Congratulations, Secretary Carson, on your newest grandson who arrived last week.

​America has always been a nation of builders. This city and this event are a case in point. The men and women who build America’s homes, build our nation’s future. And that future looks a lot brighter today than it did just over a decade ago.

We have come a long way since the 2008 crisis. But that does not mean that all is well today. America’s home builders know better than anyone that there is still a lot of untapped potential in our nation’s housing markets. 

Housing is a function of what I call the 3 L’s – land, labor, and loans. And today, all 3 L’s face challenges. We can see this in the shortage of affordable housing across the country. 

This is the affordability problem in a nutshell: Home prices keep rising, but the housing supply is not keeping up.

NAHB has documented that America’s housing stock is about as old as we have seen it in nearly a century. And despite a booming economy, housing costs are still increasing faster than most paychecks. 

As a result, today, too many Americans lack what each of us deserves: an affordable place to call home, whether it is rented or owned. 

Part of the solution is simply to build more housing of all kinds – single-family and multi-family. I know everyone here can support that. 

To build more houses, we need more builders. In the past 3 years, we have seen nearly 700,000 new construction jobs across the country. 

That is a good start to tackling some of the industry’s labor challenges. But more work remains. 

NAHB is actively building the workforce of the future through your Home Builders Institute and support of Job Corps. I commend your emphasis on job-training and apprenticeship programs. 

America needs more bricklayers, carpenters, painters, plumbers, and roofers. These jobs are not just high-paying – they are highly rewarding. They provide the dignity of work and the satisfaction of making what a family will someday call home. 

We need to lift up careers in the building trades for the next generation. I take great pride in my nephew who is just a few years out of high school and has made the great decision to start a career as a plumber. 

But it is not just about labor. One of the biggest factors restricting new home construction is the accumulation of burdensome laws and regulations. America’s home builders deal with this challenge every day. It is a national problem with local roots.

Local governments are often the source of the most burdensome regulations – like zoning and land-use restrictions, building codes, and permitting requirements.

NAHB has looked at this issue and estimated that red tape accounts for nearly a quarter of the price of a new single-family home and nearly one-third of the costs of new multi-family properties. And those are just the homes that actually get built. In many cases, steep regulatory costs prevent the construction of new housing in the first place.

Tackling our affordable housing shortage requires thinking nationally and acting locally. 

That is exactly what the Home Builders do so well. I encourage you to keep up your efforts to reform burdensome regulations. We need to apply the power of de-regulation to home building in localities across the country. 

Yesterday, I met with the Nevada Housing Division to learn about efforts across the state to improve housing affordability. And I was reminded of the importance of communities across the country sharing best practices and learning from each other.

For instance, we have seen cities like Minneapolis take innovative steps to reform their land-use markets and unleash the permitting process from unnecessary red tape. Cities and states across the country should follow their lead.

But, by themselves, strong labor markets and smart local policies cannot solve our affordability challenges. 

We also need a housing finance system that is competitive, liquid, efficient, and resilient. 

This brings us to the last of the 3 L’s – loans.  This is where the Federal Housing Finance Agency comes in. 

FHFA oversees Fannie Mae, Freddie Mac, and the Federal Home Loan Banks. These institutions exist to support lenders of all sizes so that borrowers can access the mortgage credit they need to buy and rent the houses you build. 

I know how hard it is for America’s home builders to make long-run investments when house prices ebb and flow with the housing cycle. Part of my job is to make sure that lenders of all sizes have enough capital to keep lending during a downturn, not just when the economy is booming as it is now. 

Today’s strong economy is a reminder that the best housing policy is a jobs policy. But if you look under the hood of our housing and mortgage markets, there are reasons to believe the foundation is vulnerable.

Many of the same warning signs that were ignored in the lead-up to the 2008 financial crisis have been reappearing. Not only has risk been rising in recent years, but Fannie and Freddie have also been undercapitalized for too long. 

Together, Fannie and Freddie own or guarantee $5.5 trillion in single and multifamily mortgages, nearly half the market. 

But until very recently, they were limited to just $6 billion in allowable capital reserves. This put their combined leverage ratio at nearly a thousand to one. 

Last September, Treasury and FHFA agreed to allow the Enterprises to retain capital of up to $45 billion combined. 

As a result, their combined leverage ratio has improved. But it still stands at around three hundred to one. By contrast, the largest financial institutions in the nation have an average leverage ratio of roughly ten to one. 

Given their risks and financial position, even in a modest downturn, Fannie and Freddie will fail.

The lack of safety and soundness at Fannie and Freddie jeopardizes their important mission. It puts taxpayers at risk of absorbing their losses, as we saw with the bailouts after the last crisis. 

And it threatens every sector of our housing system, including America’s home builders. 

This point is absolutely critical: If Fannie and Freddie fail again, liquidity in the mortgage market will dry up. If families are unable to get a mortgage, they are unable to buy houses. And when fewer people are buying houses, new or old, it hurts America’s home builders. 

For instance, as we remember from the 2008 crisis, the last time Fannie and Freddie failed they retreated from the tax credit market. I am focused on doing whatever it takes to avoid this situation from happening ever again.

But today we have an historic opportunity to repair the cracks in the system and ensure the next downturn does not spark another global crisis. 

We have strong partners in the Administration who are pursuing housing finance reform with the urgency it deserves. Last September, Secretary Carson and Secretary Mnuchin released plans to build a more resilient housing finance system that protects taxpayers and mortgage access. 

These plans are broadly consistent with my top three priorities… 

First, to cement FHFA as a world-class regulator that ensures Fannie Mae and Freddie Mac operate in a safe and sound condition. Second, to end the 11-year conservatorships. And third, to foster competitive, liquid, efficient, and resilient mortgage national housing markets.

We have been working hard the past 9 months on all three fronts. And this year we continue to build momentum for lasting reform. 

Before exiting conservatorship, Fannie and Freddie must be capable of operating in a safe and sound manner. This requires building capital to match their risk and focusing on their core statutory mission. 

Capital is the foundation of safety and soundness regulation. FHFA is working on finishing the capital rule for Fannie and Freddie, which must be in place for them to be able to raise capital. 

At the same time, we are looking closely at the risk profiles of Fannie and Freddie to ensure they match their capital levels and support their statutory missions.

We are also strengthening FHFA’s regulatory and supervisory powers. This includes taking a comprehensive look at the appraisal process. 

This event highlights the incredible advances in technology that the home building industry is known for. And we need an appraisal process that is better able to keep up with this innovation. 

FHFA is also taking steps to level the playing field for small lenders. This is critical to ensuring fair competition for financial institutions of all sizes. 

Last year, we formally prohibited Fannie and Freddie from issuing volume-based variances and exceptions, so that all lenders receive similar treatment regardless of size. And we directed Fannie and Freddie to support the development of a Qualified Mortgage standard that applies equally to all entities originating responsible loans.

Leveling the playing field for mortgage lenders is beneficial not just to the residential real estate market. It also helps acquisition, development, and construction lending. 

Community banks are the lifeblood of ADC financing, and I know they have suffered in the post-Dodd Frank era. At FHFA, our mission is to build a strong, liquid, and resilient lending ecosystem that will benefit all market participants. And the steps we are taking will support the lenders that support ADC financing.

These are just some of the highlights of the to-do list that FHFA is hard at work to complete.  

Some might argue that reform should wait for a crisis. But this shortsighted thinking fueled the last housing market collapse. 

As President Kennedy said, “the time to repair the roof is when the sun is shining.” Now is the time for bold reforms because our economy and housing market are strong. This will not always be the case. 

I am not forecasting a downturn. Rather, as a prudential regulator, I believe my job is to hope for the best and prepare for the worst. And that is why FHFA is moving forward with reform.  

Our goal is to support a liquid, stable mortgage market that finances the building of all kinds of housing – especially for low-income and working families. 

So, thank you for the invitation to speak this morning. I look forward to continuing to work in partnership with you as we build a stronger, more resilient housing finance system in America.

​Thank you.​



Media:  Raffi Williams (202) 649-3544 / Stefanie Johnson (202) 649-3030
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