WASHINGTON, DC-For the multifamily sector, the White House’s release of the white paper on GSE reform last week was a disappointment even with the steady leaks fed to the market over the past several days by the Wall Street Journal. Why? Not so much because of what it did say, but rather what it didn’t. In short, it was lacking specifics, other than the obvious, namely that it is time for the government to get out of the mortgage finance market.

Going forward, the paper said, “private markets--subject to strong oversight and standards for consumer and investor protection--will be the primary source of mortgage credit and bear the burden for losses. Banks and other financial institutions will be required to hold more capital to withstand future recessions or significant declines in home prices, and adhere to more conservative underwriting standards that require homeowners to hold more equity in their homes. Securitization, alongside credit from the banking system, should continue to play a major role in housing finance subject to greater risk retention, disclosure and other key reforms.” The messy business of getting to these ideals, it seems, has been left to Congress.

If this sounds familiar--the White House outlines a grandiose strategy for a key sector of the economy and leaves the details to Congress--that is because it is. This time last year the Congress was gearing up for a battle over healthcare reform--a bloodletting that took months to resolve. Is the mortgage finance industry in for the same process?

Not quite. For one, the subject does not evoke strong emotions in most people, at least not as healthcare does, Seth Weissman, real estate partner with Jeffer Mangels Butler & Mitchell, tells me. “I don’t think we will see the same level of rhetoric or heightened emotions as we did with healthcare.”

But the process will be an involved one, with much horse-trading back and forth, predicts Mark Oesterle, counsel of Reed Smith LLP’s financial services practice in Washington, DC and former chief minority counsel for the US Senate Committee on Banking, Housing and Urban Affairs. “Any time you have a range of considerations you will have complications that lead to an even more involved process,” he says. “Also, don’t forget, as the talks over Fannie and Freddie get underway, the rules for Dodd-Frank are still being written and implemented. There will be some overlap between the two and attention from various interest groups will be divided.”

There are also some areas in which the White House was clear, notes professor Brooklyn Law School professor David Reiss. “The report makes a renewed commitment to affordable rental housing--a subject of particular concern to HUD secretary Shaun Donovan,” he tells me. “The report also reflects a belief that the multifamily sector suffers from some sort of market failure resulting in it being underserved by the financial sector. The report makes it clear that the Administration will find some way to maintain funding for the non-luxury portion of this sector through the FHA and other programs and policy initiatives.”

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Erika Morphy

Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.