Research Paper

Mortgage Securitization in the Covid-19 Era: Commentary (Calhoun)

December 21, 2020

Authors Michael Calhoun

Current Themes

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Overview

In this commentary, Mike Calhoun, President of the Center for Responsible Lending, addresses the urgent need for reform in the operations and structure of Government-Sponsored Enterprises (GSEs) in light of the COVID-19 pandemic. The commentary emphasizes the critical role GSEs play in supporting the housing market and highlights the necessity to address the widespread affordable housing crisis and the persistent racial homeownership divide.

Key Message

Calhoun advocates for comprehensive reforms in GSE operations to address the affordable housing crisis and the racial homeownership gap. GSEs’ market stabilizing measures like mortgage forbearance and refinancing initiatives have not been equitably distributed, leaving low-wealth households and families of color at a disadvantage.

Calhoun argues for a revised GSE capital rule that lowers the cost burden on lower-wealth borrowers, promotes inclusive lending, and ensures fair access to mortgage credit. He supports maintaining the GSEs under a utility model post-conservatorship, which would direct their efforts towards serving the full market and supporting sustainable homeownership. Additionally, he calls for increased efforts and financial contributions from GSEs to affordable housing programs, targeting assistance for households of color to bridge the racial wealth gap. These reforms are essential for ensuring that the GSEs fulfill their public mission of promoting affordable and inclusive housing.