Policy Memoir About Averting 2020 Mortgage Meltdown Published

Posted on by TMN Editor

By PATRICK LAVERY

A new book providing insider insight into how millions of Americans were provided mortgage and rental assistance in response to the COVID-19 pandemic has been released.

“Shelter from the Storm: How a COVID Mortgage Meltdown Was Averted” is by Cato Institute Senior Advisor Mark Calabria who was, at the outset of the pandemic, the director of the Federal Housing Finance Agency, overseeing Fannie Mae, Freddie Mac, and Federal Home Loan Banks.

Calabria’s new policy memoir, promoted as “a story about how you can directly help Main Street without bailing out Wall Street,” not only takes a look at the issues that surfaced in 2020 and beyond but also how the mistakes of the 2008 financial crisis – namely bailouts that still resonate in the wake of the recent collapses of Silicon Valley Bank and Signature Bank – provided a guidebook for federal agencies of what not to do in another period of upheaval.

Calabria, who had been serving as a senior aide to the U.S. Senate Committee on Banking, Housing, and Urban Affairs when the 2008 meltdown happened, discussed the release and his role in the COVID response during a webinar moderated by Competitive Enterprise Institute President and CEO Kent Lassman last week.

Lassman quickly identified a key distinction between 2008 and 2020 by saying that 9 million jobs were lost in the course of two years during the former crisis, and 22 million were zapped in just a two-and-a-half-month span in the latter.

Calabria said that when he took the FHFA reins, less than a year before the pandemic began, he warned that the then-strong and long-running housing cycle would end at some point and do so “painfully,” but conceded no one at the agency could have predicted how.

“We have never, and hopefully never will again, see that level of job contraction so quickly as we did in early 2020,” Calabria said. “We were able to help twice as many people (in 2020 vs. 2008), six times as quickly, and we did it at close to a zero cost, compared to about the $30 billion that cost helping homeowners have assistance in post-2008.”

Calabria said leaders at the FHFA concluded early on that COVID job losses would primarily be a renters’ issue, with only 40% of those laid off paying a mortgage at the time, calling the initial wave of assistance a “timeout” that renters would be able to benefit from expeditiously.

“On the homeowner side, we would do what I call the honor system: We would let you call your mortgage servicer, the one who collects your payment and forwards it to the investor, and if you simply stated that you had lost your job or (had) an income decline from COVID, we let you get in the program,” he said.

One challenge Calabria said COVID presented, from a federal level, was how to translate and attack the fundamentally local issue of housing supply in a modern way when some of the initiatives at FHFA’s disposal dated all the way back to the Great Depression.

In the past, he said, the attitude was “rescue first, ask questions later” – even resulting in calls for him to resign his FHFA post because of a resistance to “rescue” the mortgage industry – but the pandemic provided an opportunity for officials to analyze, in close to real-time, how to offer assistance that would be sustainable to residents, even with them having to eventually return any money loaned.

Calabria is known for laying the groundwork for the removal of Fannie Mae and Freddie Mac from government conservatorship. As a senior advisor to the Cato Institute, he provides input on the federal economic policymaking process.

Prior to heading the Federal Housing Finance Agency, Calabria served as chief economist to Vice President Mike Pence, according to the institute’s website.

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