Housing industry experts say the Obama administration’s decision to reshuffle the cabinet is a signal of its commitment to complete housing finance reform.
Shifting Housing and Urban Development Secretary Shaun Donovan, who has been President Obama’s point man with Congress and the housing industry, to the White House budget office is an encouraging sign that the push will continue even as legislative avenues stall.
To that end, industry experts argue that recruiting San Antonio Mayor Julian Castro, who was nominated on Friday to replace Donovan at HUD, adds another prong to the White House’s effort to complete a bill before Obama leaves office.
“I think with the move the president gets two strong advocates for housing finance reform,” said David Stevens, president and CEO of the Mortgage Bankers Association (MBA).
From his future perch at OMB, Donovan can continue to oversee and advocate for housing finance reform, Stevens said.
“I don’t think we’re losing Shaun, we’re gaining Castro,” he said.
Adding a second, equally persuasive voice could be just what the effort needs to stay on track, he said.
Both men will have to go through the Senate confirmation process.
Donovan was given high praise for his hard work behind the scenes with housing experts and lawmakers on how to move forward legislatively on a wind-down of government-controlled mortgage giants Fannie Mae and Freddie Mae.
“For the last six months Shaun has been energizer bunny on the issue, he has worked this thing on the Hill,” said Joe Ventrone, the vice president for regulatory and industry relations at the National Association of Realtors.
“Being at OMB gives him a bigger bully pulpit and if he continues to work at warp speed you never can tell what will happen.”
The shift gives Donovan, who has headed HUD since the start of Obama’s presidency, a promotion and a continued prominent role that will allow him to be a key voice in the housing dialogue, industry figures said.
The OMB director works closely with HUD so that should provide the opportunity for “a smooth transition,” Stevens said.
Paul Leonard with the Financial Services Roundtable’s Housing Policy Council said the industry views the shift as a positive for keeping reform moving forward despite a slew of legislative and political hurdles.
At this crucial stage — the Senate Banking Committee recently approved legislation — the Obama administration needs to maintain its housing brain trust, he said.
The Senate bill “still has potential,” Leonard said, and at least provides a “good bipartisan framework” to work from going forward.
He added that having a budget director who understands the HUD budget and a housing secretary “who’s well thought of and coming from a big city, isn’t so bad, either.”
Stevens touted Castro’s academic credentials — he’s a Harvard and Stanford graduate — and said that housing finance reform “is a great project for him to undertake.”
Castro’s strength coming into HUD is that he has “run a very complex city with a lot of competing interests in a very complex state that has a difficult political environment,” Stevens said.
That should prepare him well for any interactions with Congress, he said.
Leonard said he hopes that the Senate will continue working on the core set of principles crafted by Senate Banking Committee Chairman Tim Johnson (D-S.D.) and ranking member Mike Crapo (R-Idaho), providing real hope that legislation might finally move forward after years of delays.
Toss in some recent policy moves by Mel Watt, the director of the independent Federal Housing Finance Agency, and industry experts say the new situation offers a more positive outlook for the short- and long-term status of the housing market.
The Johnson-Crapo proposal would eventually dismantle government-controlled mortgage giants Fannie and Freddie, and replace them with a Federal Mortgage Insurance Corporation (FMIC) over a period of at least five years.
Stevens isn’t writing off Senate passage, although the complex bill won’t get through Congress until at least next year and possibly not until after Obama leaves office.
Ventrone said the conventional wisdom is a bill may not emerge until 2017, which would be nine years after the financial crisis nearly collapsed the economy.
“It’s a very complex, big meaty subject that requires continued focus to move it along,” Stevens said.